REGULATED OFFER OF SHARES IN CAPRICORN SOCIETY LIMITED WARNING STATEMENT

Transcription

1 REGULATED OFFER OF SHARES IN CAPRICORN SOCIETY LIMITED WARNING STATEMENT 1. This offer to New Zealand investors is a regulated offer made under Australian and New Zealand law. In Australia, this is Chapter 8 of the Corporations Act 2001 (Aust) and regulations made under that Act. In New Zealand, this is subpart 6 of Part 9 of the Financial Markets Conduct Act 2013 and Part 9 of the Financial Markets Conduct Regulations This offer and the content of the offer document are principally governed by Australian rather than New Zealand law. In the main, the Corporations Act 2001 (Aust) and the regulations made under that Act set out how the offer must be made. 3. There are differences in how financial products are regulated under Australian law. For example, the disclosure of fees for managed investment schemes is different under the Australian regime. 4. The rights, remedies, and compensation arrangements available to New Zealand investors in Australian financial products may differ from the rights, remedies, and compensation arrangements for New Zealand financial products. 5. Both the Australian and New Zealand financial markets regulators have enforcement responsibilities in relation to this offer. If you need to make a complaint about this offer, please contact the Financial Markets Authority, New Zealand ( The Australian and New Zealand regulators will work together to settle your complaint. 6. The taxation treatment of Australian financial products is not the same as for New Zealand financial products. 7. If you are uncertain about whether this investment is appropriate for you, you should seek the advice of an appropriately qualified financial adviser.

2 Short Form Prospectus 18 February 2016 Restatement Important Notice This Prospectus is a short form prospectus pursuant to Section 712 of the Corporations Act. This Prospectus does not contain all the information that is generally required to be set out in a full prospectus but refers to other documents, the information from which is deemed to be incorporated into this Prospectus. This Prospectus is an important document and should be read in its entirety. If you do not understand it you should consult your professional advisers. 18 February 2016 ACN

3 2 IMPORTANT INFORMATION This is an important document that should be read in its entirety before making any investment decision. You should obtain professional investment advice if you have questions about any of the matters contained in this Prospectus. This Prospectus This Prospectus is dated 18 February 2016, and was lodged with ASIC on that date. This Prospectus replaces a prospectus dated 11 December ASIC takes no responsibility for the contents of this Prospectus. Information that is contained in this Prospectus that is in addition to, or an amendment of, information contained in replaced prospectus dated 11 December 2015 includes: (a) updated information on Capricorn s assets and liabilities, financial position and performance and profit and loss from Capricorn s Half Year Report (see section 5.1); (b) updated information on Capricorn s replacement of core information systems by way of update (see sections 1.1, 2.4 and 6.2(f)); and (c) information on a bank guarantee of $192, put in place for the benefit of International Air Transport Association (IATA) in respect of Capricorn Travel s ongoing membership of IATA and access to airline ticketing systems (see section 2.5). This Prospectus is available to Australian and New Zealand investors in electronic form at The Offer constituted by this Prospectus in electronic form is available only to persons within Australia or New Zealand. It is not available to persons in other jurisdictions. Persons who access the electronic version of this Prospectus should ensure that they download and read the entire Prospectus. The website and its contents do not form part of this Prospectus and are not to be interpreted as part of, nor incorporated into, this Prospectus (with the exception of those documents expressly incorporated by reference and listed in the Short Form Prospectus section below as part of Important Information). This Prospectus (and documents expressly incorporated by reference) should solely form the basis of your investment decision. Applications for Shares may only be made on an Application Form accompanying this Prospectus. Applications for Shares under this Prospectus must be received by Capricorn by no later than 4:30 pm on 10 January 2017 or an earlier date determined by Capricorn. No Shares will be issued on the basis of this Prospectus later than 13 months after the date of this Prospectus. Unless otherwise stated, all monetary amounts in this Prospectus are in Australian dollars ($). Offer The Offer is for 15,000,000 Shares, in total (spread across the Share classes in any proportions determined at Capricorn s discretion), in: (a) (b) (c) the Australian Geographic Region Class at $1.00 per Share; the New Zealand Geographic Region Class at NZ$1.00 per Share; and the All Regions Class at $1.00 per Share, to raise up to $15,000,000 in total. Offeror Offer available in Australia and New Zealand only The Offer is made by Capricorn. Capricorn s business, management and key risks are described in this Prospectus and by any document incorporated by reference. The Offer contained in this Prospectus is only available to persons within Australia or New Zealand. It is not available to persons in other jurisdictions. No action has been taken to register or qualify this Prospectus, the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside Australia and New Zealand. This Prospectus does not constitute an offer or invitation to subscribe for Shares in any jurisdiction in which, or to any person to whom, it would not be lawful to make such an offer or invitation or issue under this Prospectus.

4 3 Defined terms time Exposure period and Certain terms and abbreviations used in this Prospectus have defined meanings which are explained in the Glossary of this Prospectus. Unless otherwise stated, all reference to times in this Prospectus are to Perth time Western Australia. The Corporations Act prohibits Capricorn from processing Applications in the seven day period after the date of lodgement of this Prospectus with ASIC. This period may be extended by ASIC by up to a further seven days. This period is known as an exposure period and the purpose of it is to enable the Prospectus to be examined by investors and ASIC prior to the raising of funds. Applications received during the exposure period will not be processed until after the expiry of that period. No preference will be conferred on Applications received during the exposure period. Forward looking statements Disclaimer Short Form Prospectus This Prospectus may contain forward looking statements identified by words such as may, could, believes, estimates, expects, intends and other similar words that involve risks and uncertainties. Any forward looking statements are not based solely on historical facts but are instead based on Capricorn s expectations about future events and results. Any forward looking statements are subject to various risk factors, uncertainties and assumptions that could cause Capricorn s actual results to differ materially from the results expressed or anticipated in these statements. Forward looking statements should be read in conjunction with risk factors set out in section 6. Neither Capricorn, its officers, employees, agents, advisers or any other person named, with their consent, in this Prospectus can assure or guarantee you that: (a) (b) any particular performance of the Shares, including those offered under this Prospectus, or any other specific objective will be achieved; or any forward looking statement or implied result will be achieved. You should only rely on information contained in this Prospectus. No person is authorised to give any information or make any representation in connection with the Offer which is not contained in this Prospectus. Any information or representation not contained in this Prospectus may not be relied on as having been authorised by Capricorn or the Directors. Except as required by law, and only to the extent so required, neither Capricorn nor any other person warrants or guarantees the future performance of Capricorn, or any return on any investment made pursuant to this Prospectus. The Shares issued under this Prospectus carry no guarantee with respect to return on capital investment, payment of dividends or the future value of the Shares. You should consider any implications that holding Shares could have on your personal circumstances, including financial and taxation implications. This Prospectus is a short form prospectus pursuant to Section 712 of the Corporations Act. This means that it does not of itself contain all the information that is generally required to be set out in a full prospectus. Rather, it incorporates by reference information contained in documents lodged with ASIC referred to in this Prospectus and deemed pursuant to section 712 of the Corporations Act to be included in this Prospectus. You are entitled to a copy of these documents or any part of them at no cost by contacting Capricorn on (Australia) or (New Zealand) at any time during the application period for the Offer. These documents may also be viewed online as part of the Corporate Documents section of the Capricorn website at The following documents have been lodged with ASIC and are taken to be incorporated by reference into this Prospectus: (a) (b) (c) (d) (e) Capricorn s Constitution and Direct Voting Regulations issued under the Constitution; Capricorn s Annual Report; Capricorn s Half Year Report; current Authorised Purchaser Agreement Terms and Conditions Australia; and current Authorised Purchaser Agreement Terms and Conditions New Zealand. As a disclosing entity, Capricorn is subject to regular reporting and disclosure obligations. Any continuous disclosure notices issued by Capricorn may be viewed online as part of the Corporate Documents section of the Capricorn website at Copies of documents lodged with ASIC, that are either incorporated by reference and listed above or subsequently lodged in compliance with disclosure obligations, may be obtained from or inspected at an office of ASIC or obtained from Capricorn free of charge.

5 4 Privacy By filling out an Application Form, you are providing personal information to Capricorn and consenting to Capricorn using it as set out below. Capricorn, and Capricorn's agents, service providers, delegates or third parties acting on Capricorn s behalf, collect, hold and use that personal information to assess and process your Application Form, comply with Capricorn s legal and regulatory requirements, provide services and administer your Shares (including the payment of dividends and communication of financial results and other information that Capricorn is required to or may wish to provide to you as a Member). Your personal information may also be used to provide and administer any other product or service that you may receive from Capricorn, including your Account. In accordance with terms of the Capricorn Privacy Policy, once personal information is no longer needed by Capricorn it will either be destroyed or de-identified. If your Application is successful and you are issued Shares, the Corporations Act requires Capricorn to include information about you on its public register (including your name, address and details of securities held) which may be accessed by other Members or, for a fee, members of the public. If you do not provide the information requested on the Application Form, Capricorn may not be able to process your Application. You have the right to access your personal information held by Capricorn subject to certain exceptions under law. A fee may be charged for access. Requests for access to personal information should be directed to: Capricorn Society Limited 28 Troode Street WEST PERTH, WA 6005 Attention: The Privacy Officer Telephone: (Australia) or (New Zealand) If you are a Prospective Member you also provide a broader consent to Capricorn using your personal information as detailed in the Collection Statement contained in the Authorised Purchaser Agreement which you must also agree to as part of becoming a Member. If you are already an Authorised Purchaser or Member then you have already provided such broader consent. We are not likely to, but may, disclose your information overseas. Our Privacy Policy contains more information about how we handle personal information, including how you can access and correct your personal information or make a complaint. Our Privacy Policy is available at Further queries If you are considering applying for Shares under the Offer, this Prospectus is important and should be read carefully and in its entirety before deciding whether or not to apply for Shares. The information in this Prospectus is not financial product advice and does not take into account your investment objectives, financial situation or particular needs. In particular, in considering Capricorn s prospects, you should consider the risk factors that could affect Capricorn s performance. You should carefully consider these factors in light of your personal circumstances (including financial and taxation issues). If you do not understand any part of this Prospectus, or are in any doubt as to whether to invest in Shares or not, it is recommended that you seek professional guidance from your stockbroker, solicitor, accountant or other independent and qualified professional adviser before deciding whether to invest. If you have any questions in relation to the Offer, please call Capricorn on (Australia) or (New Zealand).

6 CONTENTS INVESTMENT OVERVIEW AND OFFER DETAILS...7 BUSINESS OVERVIEW OF CAPRICORN...17 RIGHTS AND LIABILITIES ATTACHED TO SHARES DIRECTORS, SENIOR MANAGEMENT & CORPORATE GOVERNANCE FINANCIAL INFORMATION ABOUT CAPRICORN...46 INVESTMENT RISK...48 ADDITIONAL INFORMATION...58 GLOSSARY...62 CORPORATE DIRECTORY...64

7 6 11 December 2015 LETTER FROM THE CHAIRMAN Welcome to Capricorn. On behalf of my fellow Directors, I am pleased to provide you with the opportunity to become a shareholder of Capricorn or for existing shareholders, acquire additional shares in Capricorn. Capricorn from its humble beginnings in the 1970 s involving 12 Golden Fleece Service Station proprietors in Perth, Western Australia to now has always operated on the co-operative principles promoted by the International Cooperatives Alliance. We take these co-operative principles seriously. Capricorn was the first Australian member to join the International Co-operatives Alliance ( ICA ), being the peak global body representing co-operatives and mutual businesses. ICA was formed in 1895 and is a non-governmental organisation with members from 85 countries. Our Group CEO, Mr Greg Wall is the first ever Director elected to the ICA from Australia. Capricorn is also one of the founding partners of the Business Council of Co-operatives and Mutuals which represents the co-operative and mutual models of enterprise and promotes the role of such businesses in the economic and community development of Australia. It is this spirit of co-operation which makes Capricorn so unique. For Members of Capricorn, they are not just a customer or a number but an owner too. At Capricorn we like to think this makes being a Member even more special and is reflected in how we treat our Members. I invite you to join Capricorn as I did many years ago. This Prospectus along with the documents it incorporates by reference contains detailed information about Capricorn, the details of the Offer and a description of key risks associated with investing in Capricorn. This Prospectus is important and should be read carefully and in its entirety before deciding whether or not to apply for Shares. To apply for Shares please complete the Application Form provided along with this Prospectus. Your Area Manager is also available to assist in terms of completion of the Application Form. If you have any other questions in relation to the Offer, please call Capricorn on (Australia) or (New Zealand). On behalf of all Directors and staff at Capricorn, welcome and for all Members we hope you make the most of this wonderful opportunity as other Members have done so for over 40 years. Russell Becker Chairman Capricorn Society

8 Investment Overview and Offer Details

9 8 1. INVESTMENT OVERVIEW AND OFFER DETAILS 1.1. Investment Overview The following table provides an overview of information about Capricorn that may be relevant to your decision to apply for Shares. Information in the table is only intended to be an overview. Directions to where further information may be found in this Prospectus, or in other documents incorporated by reference into this Prospectus, are also provided in the table. Details of the Offer are provided in Section 1.2 below. Topic Summary Further Information What is the nature of Capricorn s business? Capricorn acts as an intermediary in the automotive industry. Capricorn does this by providing Authorised Purchasers, which are all from the automotive and allied industries, with Accounts on which they may purchase goods and services from Preferred Suppliers (or directly from Capricorn). Authorised Purchasers, through 16,800 Accounts, purchase goods and services from 1,800 Preferred Suppliers operating out of a network of 5,000 locations across Australia and New Zealand. Capricorn directly pays each Preferred Supplier for all purchases from that Preferred Supplier made by Authorised Purchasers using their Accounts. Capricorn receives a service fee from the Preferred Supplier on such payments. Capricorn relies on this service fee for a significant proportion of its trading income. In comparison, Authorised Purchasers make full payment to Capricorn, without any service fee deduction or discount, in respect of those same purchases made by Authorised Purchasers on their Account from the Preferred Suppliers. Capricorn bears the risk of any failure or delay in Authorised Purchasers making payment on their Account. Capricorn also provides a range of other services to Authorised Purchasers either directly or through its related companies, including: (i) direct financing of capital equipment and finance brokering services through its Capricorn Finance division; (ii), arranging of risk protection and brokering of general insurance through its Capricorn Risk division; (iii) travel agency services through Capricorn Travel; (iv) advertising services and the promotion of Preferred Suppliers through publications including Capricorn s industry magazine, Ignition, trade directory Purple Pages and advertising publication Sparks ; and (v) hosting of conventions, trade shows and other industry events. Sections 2.1 and 2.2

10 9 What is Capricorn s strategy? As a Member-owned business Capricorn puts the Member at the centre of everything it does and commits to making their business rewarding and easier. Fundamental to Capricorn s strategic plan is growing Member numbers and increasing the amount Members spend through their Capricorn Accounts as well as enhancing and adding to existing offerings outside of the established business of providing credit. Investment in processes, systems and capability required to drive continued growth in Capricorn s established automotive business of providing credit to its Members and in the new Capricorn Risk Services business is the current key strategic focus. This is a significant multi-year program of work to replace core legacy technology in the Capricorn Group with new systems. Capricorn is currently in the execution phase of this program with system launch having commenced in early Capricorn also has two strategies underway to support future growth. The first involves expanding Capricorn s sales team to better service existing members and facilitate new member growth. The second is a complimentary growth strategy within Capricorn Risk Services, aimed at growing both Capricorn Mutual as well as the general insurance services business. Capricorn recognises the potential risk associated with its Members operating solely within the automotive and allied industries. The automotive industry is dynamic with industry consolidation, changes in technology, changes in market preferences and operating models. Capricorn will therefore continue to identify and assess potential diversification opportunities that may allow it to leverage its current resources and capabilities to both reduce overall risk through diversification and improve returns to Members. Section 2.4

11 10 What are the key risk factors associated with the Shares and Capricorn? There is No Liquid Market for Shares There is no liquid market for the Shares and no prospect of capital appreciation. That means the return a Member gets on Shares is limited to dividends, if declared, and the entitlements that are associated with being a Member (such as the ongoing provision of an Account and the ability to redeem Reward Points). Capricorn Relies on the Service Fee for its Trading Income Capricorn derives the majority of its trading income from the service fee. The service fee is paid by each Preferred Supplier on and in respect of payments made by Capricorn to that Preferred Supplier for purchases from that Preferred Supplier made by Authorised Purchasers using their Account. This is not a diversified source of income, meaning that anything that materially adversely affects this income (for example, increased bad debts, loss of a key Preferred Supplier or disruption or inadequacy of IT systems central to the operation of Accounts) would materially adversely affect Capricorn. Capricorn is replacing its core information systems Capricorn continues a significant multi-year program of work to replace core legacy technology with new systems in both the Automotive and Risk Services businesses. Capricorn has and will invest significant funds in replacing these core systems. Capricorn commenced using the replacement systems in the Automotive business in the first quarter of 2016 and expects to commence using the replacement systems in the Risk business in the first half of Any delays in implementing these replacement systems, any failure of these replacement systems to meet the business needs of Capricorn or any significant increase in the cost of replacement systems may adversely affect Capricorn s performance. Section 6 What is Capricorn s financial position and performance? As at 31 December 2015 (as per the Half Year Report) Capricorn had net assets of $138.6 million (compared to $131.7 million as at 30 June 2015 (as per the Annual Report)). As at 31 December 2015 (as per the Half Year Report) Capricorn had cash and cash equivalents on hand and term deposits of $50.1 million (compared to $64.3 million as at 30 June 2015 including any restricted cash deposits (as per the Annual Report)). For the six months ended 31 December 2015 (as per the Half Year Report) Capricorn had net trading revenue of $37.5 million, other revenue of $13.3 million and profit before tax of $12.3 million (compared to net trading revenue of $70.3 million, other revenue of $25.3 million and profit before tax of $22.0 million for the year ended 30 June 2015 (as per the Annual Report)). Section 5, the Annual Report and the Half Year Report

12 11 Who is in control of Capricorn and do they have appropriate expertise? Capricorn s current Directors are: (a) (b) (c) (d) (e) (f) (g) (h) Russell Becker; Mark Cooper; Julie Wadley; David Kemp; Philip Saxton; Peter Stewart; Bruce Rathie; and Mario Pirone. With the exception of Directors Rathie and Pirone, Directors are drawn from the Members in the various geographic zones in which Capricorn operates. As such, these Directors have been and continue to be active business operators in the automotive industry. Directors Rathie and Pirone are independent non-executive Directors who bring as Directors a set of skills and expertise that complements the experience and expertise of the Member appointed Directors. Sections 4.1, 4.2 and the Corporate Governance Statement of the Annual Report Are there any significant interests and benefits payable to Directors or other persons connected to Capricorn or the Offer? What do Shares cost and what are the entitlements associated with holding Shares? No, there are no such significant interests or benefits arising out of the Offer. Shares in the Australian Geographic Region Class are offered at an Issue Price of $1.00 per Share. Shares in the New Zealand Geographic Region Class are offered at an Issue Price of NZ$1.00 per Share. Shares in the All Regions Class are offered at an Issue Price of $1.00 per Share. Share purchases can only be paid for through an Account. Minimum investment sizes apply, depending on whether or not the Applicant is already a Member of Capricorn. For Applicants that are not Members, the minimum and maximum investment size is 200 Shares. Generally the maximum investment size is 5,000 Shares. An Applicant may be eligible to apply for more Shares depending on the value of Reward Points earned in the previous financial year. If you are a Member then the minimum application is for one Share. Investing in Shares is a prerequisite for being a Member of Capricorn. Members of Capricorn may receive a range of entitlements including: access to trade credit; participation in the Capricorn Rewards Program; and dividends (if declared). Section 7.4 Sections 1.2, 3.1, 3.2 and 3.4 How will Capricorn use the Offer proceeds? Capricorn will use the Offer proceeds for working capital requirements and general corporate purposes. The purpose of the Offer is not to raise money for any specific or immediate use by Capricorn. The purpose is to provide a means for people to join Capricorn and access the entitlements of being a Member of Capricorn. Section 1.2

13 Offer Details Topic What is being offered and at what price? How will the Shares rank? How are dividends determined? Who is eligible to participate in the Offer? Offer Detail Capricorn is offering a maximum of 15,000,000 Shares, in total (spread across the Share classes in any proportions determined at Capricorn s discretion), in: (a) (b) (c) the Australian Geographic Region Class at $1.00 per Share; the New Zealand Geographic Region Class at NZ$1.00 per Share; and the All Regions Class at $1.00 per Share, to raise up to $15,000,000 in total. There is no minimum subscription amount for the Offer and the Offer is not underwritten. Shares within each class issued because of this Offer will rank equally with each other and with existing Shares of that same class already on issue. Dividends (if any) applicable for Shares of a class may be different for each of the Share classes. Capricorn has not adopted a dividend policy for the Shares. The Directors may determine the quantum of dividend, if any, from year to year having regard to matters such as Capricorn s current and expected financial performance in the subject and succeeding years, retained profits, future plans and available cash. Australian Geographic Region Class If you are an existing Member in this class or Authorised Purchaser or Prospective Member that satisfies the Membership Criteria and carries on business in Australia (but are not a Preferred Supplier or connected to a Preferred Supplier (including by being a related party to the Preferred Supplier or under common control with a Preferred Supplier)) then you may apply for Shares in the Australian Geographic Region Class. New Zealand Geographic Region Class If you are an existing Member in this class or Authorised Purchaser or Prospective Member that satisfies the Membership Criteria and carries on business in New Zealand (but are not a Preferred Supplier or connected to a Preferred Supplier (including by being a related party to the Preferred Supplier or under common control with a Preferred Supplier)) then you may apply for Shares in the New Zealand Geographic Region Class. All Regions Class If you are an existing Member in this class or Authorised Purchaser or Prospective Member who satisfies the Membership Criteria and carries on business in Australia and you are also an Eligible Supplier, or are connected to an Eligible Supplier (including by being a related party to the Eligible Supplier or under common control with an Eligible Supplier), then you may apply for Shares in the All Regions Class.

14 13 Topic What is the Membership Criteria for becoming a Member? What are the differences between Members, Prospective Members, Qualified New Authorised Purchasers and Eligible Suppliers? Offer Detail Membership of Capricorn is available at the discretion of the Directors to any business proprietor in the automotive or any allied industry carried on in Australia or New Zealand (or any other country in which Capricorn issues Shares) that agrees to use the services of Capricorn, provided that the person: (a) (b) (c) (d) (e) (f) is over the age of 18 years, if a natural person; lawfully purchases or sells goods, services and property used in any automotive or allied industry; agrees to be an active member of Capricorn (by acquiring goods or services from Capricorn or Preferred Suppliers at least once in every three month period); will hold at least 200 but no more than 250,000 Shares including after acquiring Shares pursuant to this Prospectus; has agreed to the terms and conditions of the Authorised Purchaser Agreement and has been accepted by Capricorn as an Authorised Purchaser; and meets any criteria set by Capricorn from time-to-time including but not limited to a spending criteria. A Member must meet the Membership Criteria on a continuous basis, and not just at the time of first becoming a Member. Whilst Membership of Capricorn is available at the discretion of the Directors to any business proprietor in the automotive or any allied industry carried on in the Republic of South Africa that agrees to use the services of Capricorn, the Directors of Capricorn have no intention to grant Membership to any such person in South Africa. Capricorn currently has no Members or Authorised Purchasers in South Africa. A Member is a person who is an Authorised Purchaser and who satisfies the Membership Criteria and already holds Shares. A Prospective Member is a person who is capable of satisfying the Membership Criteria but who is not currently an Authorised Purchaser and who does not yet hold Shares. A Qualified New Authorised Purchaser is a person who is an Authorised Purchaser and who satisfies the Membership Criteria but who does not yet hold Shares. An Eligible Supplier is a Preferred Supplier who is also an Authorised Purchaser and who satisfies or is capable of satisfying the Membership Criteria and who is considered by Capricorn to be a small to medium enterprise and capable of purchasing meaningful volumes through an Account but who does not yet hold Shares. What are the key dates of the Offer? Opening Date of the Offer 4:30 pm Western Standard Time (GMT/UTC + 8:00) on 11 December 2015 Closing Date of the Offer 4:30 pm Western Standard Time (GMT/UTC + 8:00) on 10 January 2017 Expiry Date of this Prospectus 10 January 2017 The Closing Date of the Offer is indicative only and is subject to change. Capricorn reserves the right to vary the Closing Date of the Offer, including by closing the Offer early, without notice to any Applicant or recipient of this Prospectus.

15 14 Topic Offer Detail How will the Offer affect the capital structure of Capricorn? Current number of Shares (all classes) on issue (on 11 December 2015): Maximum number of Shares being offered under this Prospectus (spread across the Share classes in any proportions determined at Capricorn s discretion) in the: (a) Australian Geographic Region Class; (b) New Zealand Geographic Region Class; and (c) All Regions Class. Total number of Shares (all classes) if the Offer is fully subscribed: 99,473,292 15,000, ,473,292 These figures exclude the effect of any of the following events that may happen prior to the Closing Date: (a) issue of Shares under the Dividend Reinvestment Plan; (b) buyback of Shares by Capricorn; and (c) any other variation of Capricorn s capital structure including capital reduction or consolidation. What is the purpose of the Offer and how will the proceeds be used? What is the minimum investment size? Will I be guaranteed a minimum allocation under the Offer? The purpose of the Offer is not the raising of capital for any specific or immediate purpose by Capricorn, although any proceeds of the Offer will be applied by Capricorn to working capital requirements and other general corporate purposes. The purpose of this Offer is to provide a means for those people that meet the Membership Criteria to join Capricorn and access the entitlements of being a Member of Capricorn, including the right to become or continue to be an Authorised Purchaser. Consistent with Capricorn s co-operative principles, the requirement that Shares may only be issued to those people that meet the Membership Criteria means that Members are only those people that make, or are likely to make, an economic contribution to Capricorn (primarily through the volume of purchases on their Account). Capricorn requires Members to hold a minimum of 200 Shares at all times. This means that if you are not a Member then the minimum application is for 200 Shares. If you are a Member then the minimum application is for one Share. No, Capricorn makes no assurance that you will receive a minimum allocation of Shares under the Offer. Capricorn may also in its absolute and unfettered discretion excluding any implied term of good faith either reject your Application or scale-back the number of Shares you apply for and to issue some lesser amount.

16 15 Topic What is the maximum investment size? Offer Detail Under the terms of an exemption granted to Capricorn from securities hawking requirements in the Corporations Act, Prospective Members, Qualified New Authorised Purchasers and Eligible Suppliers approached under the terms of such exemption may acquire a maximum of 200 shares as part of becoming a Member. Capricorn has also adopted an internal policy of only permitting the same parties whether approached under the terms of such exemption or not to acquire a maximum of 200 shares as part of becoming a Member. The Directors have further resolved that Capricorn will permit Members to purchase additional shares each financial year to the value of whichever is the greater of: (a) (b) $5,000; or the value of Reward Points earned in the previous financial year. The value of Reward Points is calculated at one point equals one cent in the currency of the country in which the Member s Account is operated and is used to determine the value of entitlement only. Reward Points cannot be redeemed for Shares. Setting the maximum investment size in this manner is consistent with Capricorn s co-operative principles as allocations of Shares will generally be proportionate to Member s proven economic contribution to Capricorn (which is primarily assessed through purchases placed on their Account which earn Reward Points). It is also consistent with Capricorn s philosophy to encourage Members to be active users of their Account in order to be in a position to share in the profits generated by Members trading through their Account. In addition to the above restrictions on the number of Shares that may be held, Directors have resolved that Capricorn will not accept an Application that would mean a Member would hold more than 250,000 Shares, regardless of whether or not they satisfy the above limitations. This means that if you are not a Member then the maximum application is for 200 Shares. If you are a Member then maximum application is for 250,000 Shares less the number of Shares you already hold subject to compliance with the above trading formula determining share purchase entitlement each financial year. Finally, Capricorn s Constitution provides that the maximum number of shares issued to a Member must not exceed one-fifth of all Shares. Will the Shares be listed? What are the tax implications of investing in the Shares? Can I redeem Capricorn Reward Points to pay the Issue Price of a Share? Can I pay for Shares using my Account? No, the Shares will not be listed on the Australian Stock Exchange or any other securities trading exchange. Capricorn s Constitution specifically prohibits the listing of the Shares on any exchange. The tax consequences of any investment in Shares will depend upon your particular circumstances. You should obtain your own tax advice prior to acquiring Shares. No. Reward Points cannot be redeemed to pay the Issue Price of a Share. The Issue Price is to be paid by charge to your Account. Your Account may be paid by a range of means including, where available, direct debit, online payment, BPAY, PostBillPay, direct deposit, credit card or redemption of Reward Points (although Capricorn reserves the right to change the means of payment at any time in the future). Yes, using your Account is the only way that you can pay for Shares. Reward Points are not awarded on the Issue Price for Shares placed on your Account.

17 16 Topic How do I apply for Shares under this Offer? Can I apply for Shares under this Offer if I am not in Australia or New Zealand? What are my obligations once I submit an Application? What is Capricorn s policy around allocating Shares? Offer Detail You can apply for Shares by completing and returning the Application Form accompanying this Prospectus. If you are a Prospective Member then you must at the same time also complete and sign the appropriate application to become an Authorised Purchaser (which can be obtained on request directly from Capricorn). In New Zealand only, the Shares Application Form and application to become an Authorised Purchaser are in one combined document. Completed Application Forms must be received by Capricorn by the Closing Date of the Offer, being 4:30 pm Western Standard Time (GMT/UTC + 8:00) on 10 January 2017 or any earlier date determined by Capricorn. No. This Prospectus does not constitute an offer of Shares outside of Australia and New Zealand. No action has been taken to register or qualify the Shares or the Offer or otherwise to permit a public offering of the Shares in any jurisdiction outside of Australia and New Zealand and Capricorn will not accept any application from persons outside of Australia or New Zealand under this Prospectus. An Application is an offer by you to Capricorn to purchase Shares for the Issue Price on the terms and conditions set out in this Prospectus (including any supplementary or replacement Prospectus) and the Application Form. To the extent permitted by law your offer is irrevocable. Your Application may be accepted by Capricorn in respect of all or some of the Shares applied for, or not accepted by Capricorn at all without further notice to you. Acceptance of an Application for all or some of the Shares specified in the Application Form will give rise to a binding contract between you and Capricorn. The allocation of Shares under this Offer will be determined by Capricorn in its absolute and unfettered discretion excluding any implied term of good faith. In particular, Capricorn may: (a) (b) (c) reject your Application for any reason whatsoever in its absolute and unfettered discretion excluding any implied term of good faith (including but not limited to where an Application has been completed incorrectly); allocate to you fewer Shares than the number of Shares that you applied for; or subject to the Corporations Act, vary the dates and times of the Offer, including the Closing Date, which it may do in its absolute and unfettered discretion excluding any implied term of good faith without prior notice. If you are a Prospective Member then you must at the same time also complete and sign the appropriate application to become an Authorised Purchaser. Capricorn reserves the right to reject any application by you to become an Authorised Purchaser, with the consequence being that you will not satisfy the Membership Criteria and therefore will not be eligible to be issued Shares. Where can I find more information? (a) (b) (c) (d) Read the remainder of this Prospectus; Read the documents incorporated by reference into this Prospectus which are available from Capricorn on request, may be viewed at the Corporate Documents section of Capricorn s website at or are available from ASIC on request; Contact your solicitor, accountant or other independent professional adviser; and/or Visit (the website and its contents do not form part of this Prospectus and are not to be interpreted as part of, or incorporated into, this Prospectus with the exception of those documents incorporated by specific reference).

18 Business Overview of Capricorn

19 18 2. BUSINESS OVERVIEW OF CAPRICORN 2.1. Overview Capricorn is a public company limited by shares registered in Western Australia. Its corporate office is located at 28 Troode Street, West Perth, Western Australia. Capricorn operates nationwide across Australia and also in New Zealand. It operates a branch in New Zealand and has operated in New Zealand since Capricorn previously had a branch in South Africa which it has closed as part of its cessation of South African operations and exit from South Africa as announced in March A description of the corporate structure of Capricorn and its related companies is provided in Section 2.3 and Diagram 2. The most significant part of Capricorn s operations is acting as an intermediary in the automotive industry. It does this by facilitating purchases by Authorised Purchasers (which are all from automotive and allied industries and are typically independent general repairers and specialist technicians and mechanics who comprise an essential part of the aftermarket repair industry) from Preferred Suppliers (which include leading automotive suppliers) through Capricorn provided Accounts. Diagram 1 provided in Section 2.2(a) illustrates the relationship between Capricorn and its Authorised Purchasers and Preferred Suppliers. As at the date of this Prospectus, Authorised Purchasers, through 16,800 Accounts, purchase goods and services from 1,800 Preferred Suppliers operating out of a network of 5,000 locations across Australia and New Zealand. Capricorn also provides a range of services to Authorised Purchasers directly or through its related companies. Capricorn has its origins as a co-operative established in 1975 under the Western Australian Co-operative and Provident Societies Act 1903 (WA) to assist automotive repair and service businesses. Capricorn converted to a public company in Despite conversion to a public company, Capricorn continues to operate on the co-operative principles promoted by the International Cooperatives Alliance and is considered a corporatised trading co-operative. Capricorn is a member of the International Cooperatives Alliance which is an independent, non-governmental association which unites, represents and serves co-operatives worldwide. Capricorn is also one of the founding partners of the Business Council of Co-operatives and Mutuals which represents the co-operative and mutual models of enterprise and promotes the role of such businesses in the economic and community development of Australia. Capricorn is Australia's largest company in the automotive parts buying industry which operates on co-operative principles (in terms of number of Accounts operated by Authorised Purchasers and the value of purchases financed). The co-operative principles affect numerous aspects of the Shares, for example: (a) each Member is limited to one vote regardless of the number of Shares held; (b) a person must meet the Membership Criteria before they are eligible to apply for Shares; (c) the number of Shares that can be applied for is limited based on a Member s economic contribution to Capricorn (through purchases placed on their Account); and (d) the majority of Directors being appointed from, and by, the Members.

20 Business Activities (a) Accounts Capricorn s core business activity is the provision of Accounts to Authorised Purchasers. Accounts give Authorised Purchasers access to instant credit through Capricorn for purchases of goods and services from Preferred Suppliers and from Capricorn and its related companies. Capricorn seeks to appoint a range of Preferred Suppliers to best meet the needs of Authorised Purchasers, both in terms of geographic location and goods and services offered. Prices offered by Preferred Suppliers to Authorised Purchasers are generally competitive, recognising both the volumes purchased by Authorised Purchasers through their Accounts and the benefits to the supplier of being a Preferred Supplier, but they may not be the lowest prices available in the broader market. Capricorn collates each Authorised Purchaser s monthly purchases from all Preferred Suppliers placed on Account and issues that Authorised Purchaser with a single monthly statement. Capricorn makes payment to each Preferred Supplier in respect of the purchases made by Authorised Purchasers on their Accounts from that Preferred Supplier. Capricorn receives a service fee from the Preferred Supplier on this payment (which Capricorn deducts from the payment made to the Preferred Supplier). Capricorn relies on this service fee for the majority of its trading income. In comparison, Authorised Purchasers make full payment to Capricorn, without any service fee deduction or discount, in respect of those same purchases made by Authorised Purchasers on their Account from the Preferred Suppliers. Capricorn bears the risk of any failure or delay in Authorised Purchasers making payment on their Account. Should an Authorised Purchaser fail to make payment to Capricorn in accordance with the Account terms then an Interest Charge is imposed which reflects a genuine pre-estimate of Capricorn s loss arising from late payment of the Account. Capricorn regularly reviews the Interest Charge to satisfy itself the charge remains an appropriate pre-estimate. Capricorn also provides Authorised Purchasers with further time to pay their Account in exchange for the Interest Charge. To assist Authorised Purchasers operate their Accounts, each is provided with an Authorised Purchaser number which identifies them to Preferred Suppliers. Each Authorised Purchaser is also regularly issued with a directory of the Preferred Suppliers in their region. Authorised Purchasers receive a range of other entitlements, depending in part on whether or not they are also a Member (described in more detail in Sections 3.4 and 3.5).

21 20 (b) Other Business Activities In addition to providing Accounts, Capricorn carries out a range of other activities either directly or through its related companies. (i) Direct Finance. Capricorn provides limited direct credit and loans to Members (limited in the sense of loan term, individual loan quantum and from an overall loan portfolio) to fund the purchase of capital equipment and associated items through its range of CAPezifinance products and other products such as insurance premium funding. (ii) Brokered Finance. Capricorn, through its wholly owned subsidiary Capricorn Society Financial Services Pty Ltd (Australian Credit Licence: ), acts as an introducer and broker to assist Authorised Purchasers and the general public obtain finance for business and domestic purposes from third parties. (iii) Mutual Management. Capricorn provides mutual management and sales services to Capricorn Mutual through Capricorn Mutual Management Pty Ltd and Capricorn Risk Services Pty Ltd, both wholly owned subsidiaries of Capricorn. (iv) Risk Services. Capricorn Risk Services Pty Ltd, a wholly owned subsidiary of Capricorn, provides access to both protection issued by Capricorn Mutual and general insurance products brokered through Capricorn Insurance Services Pty Ltd: a. Protection. Capricorn Mutual, a subsidiary of Capricorn by reason of Capricorn s power to appoint the majority of its directors, provides risk protection products to its members. Membership of Capricorn Mutual is available to Authorised Purchasers of Capricorn, but there is no requirement for Authorised Purchasers to become members of Capricorn Mutual. Capricorn Mutual is not part of the Capricorn Group for financial reporting or taxation purposes. b. General Insurance. Capricorn Insurance Services Pty Ltd, a wholly owned subsidiary of Capricorn, brokers general insurance primarily focusing on those types of businesses and activities that Capricorn Mutual does not cater for. Capricorn Insurance Services Pty Ltd holds an Australian Financial Services Licence (AFS Licence No ) and is authorised to provide financial product advice and deal in general insurance. (v) Travel. Capricorn provides travel agency services to Authorised Purchasers in Australia and the general public through its wholly owned subsidiary Capricorn Travel Australia Pty Ltd. (vi) Technology Services. Capricorn provides technology services through its wholly owned subsidiary Capricorn Technology Services Pty Ltd. Capricorn Technology Services Pty Ltd has entered into a joint venture with Anthem Software Pty Ltd to provide members with access to web based lead generation technology services.

22 Corporate Structure The activities of Capricorn s related companies are set out in the following sections Capricorn Mutual Limited Capricorn Mutual Ltd (ACN ) ( Capricorn Mutual ) is a public company limited by guarantee. It is a subsidiary of Capricorn under the Corporations Act by reason of Capricorn s power to appoint the majority of directors of Capricorn Mutual. It is not part of the Capricorn Group for financial reporting or tax purposes. Membership of Capricorn Mutual is available to Authorised Purchasers of Capricorn. Authorised Purchasers of Capricorn are not required to be members of Capricorn Mutual. Capricorn Mutual provides its members with risk protection products, an alternative to insurance, for personal and business risks on a discretionary basis. As the risk protection products provided by Capricorn Mutual are classified by ASIC as 'Miscellaneous Mutual Risk products', Capricorn Mutual holds an Australian Financial Services Licence (Number ). Further information about the Protections is set out in Capricorn Mutual s Product Disclosure Statement (including any Supplementary Product Disclosure Statement(s)) relating to the Protections. Capricorn Mutual s Product Disclosure Statement does not form part of this Prospectus and is not to be interpreted as part of, nor incorporated into, this Prospectus. Capricorn has provided financial support to Capricorn Mutual. Details about the financial support provided to Capricorn Mutual are described in the Prospectus. Capricorn Mutual is also a Capricorn Preferred Supplier and pays a service fee to Capricorn.

23 Capricorn Mutual Management Pty Limited Capricorn Mutual Management Pty Ltd (ACN ) ( CMM ) is a wholly owned subsidiary of Capricorn. CMM was established to provide mutual management services to Capricorn Mutual. CMM has been appointed by Capricorn Mutual to manage its business and to assist in the handling of claims by Capricorn Mutual members. CMM and its employees are authorised representatives of Capricorn Mutual (Australian Financial Services authorised representative number ). Details of the financial services that CMM is authorised to provide on behalf of Capricorn Mutual are set out in CML s Financial Services Guide. CMM receives a fee from Capricorn Mutual for providing these services, which is included as part of the $13.3 million of other revenue reported by Capricorn in its Half Year Report ($25.3 million for the year ended 30 June 2015 as per Capricorn s Annual Report) Capricorn Society Financial Services Pty Limited Capricorn Society Financial Services Pty Ltd (ACN ) ( CSFS ) is a wholly owned subsidiary of Capricorn and holds an Australian Credit Licence under the National Consumer Credit Protection Act 2009 (Cth) (Licence Number: ). CSFS acts as both an introducer and a broker to provide Authorised Purchasers and the general public with access to levels of credit and debt funding that cannot appropriately be provided by Capricorn directly through Member accounts or direct financing activities. For example, if Authorised Purchasers need access to longer term financing of high value capital equipment. These activities constitute a minor operating activity of Capricorn and revenue received from providing these services is included as part of the $13.3 million of other revenue reported by Capricorn in its Half year Report ($25.3 million for the year ended 30 June 2015 as per Capricorn s Annual Report) Capricorn Travel Australia Pty Limited Capricorn Travel Australia Pty Ltd (ACN ) ( Capricorn Travel ) is a wholly owned subsidiary of Capricorn and operates as a travel agency. Capricorn Travel is an accredited agent of the Australian Federation of Travel Agents Travel Accreditation Scheme (ATAS Accreditation No.: A10552). Capricorn Travel provides travel services to Authorised Purchasers, Preferred Suppliers, Capricorn employees and also the general public (within Australia only). The business began as an extra service for Capricorn Members and remains a minor operating activity of Capricorn. Capricorn Travel is a member of the Australian Federation of Travel Agents. In 2015, Capricorn Travel received the Travellers Choice Silver award. It has received the Travellers Choice Silver award for seven of the last nine years. Revenue received by Capricorn Travel is included as part of the $13.3 million of other revenue reported by Capricorn in its Half Year Report ($25.3 million for the year ended 30 June 2015 as per Capricorn s Annual Report).

24 Capricorn Technology Services Pty Limited and ineedaservice Pty Limited Capricorn Technology Services Pty Ltd (ACN ) ( CTS ) is a wholly owned subsidiary of Capricorn and was established to deliver Capricorn s technology services strategy. Through CTS Capricorn entered into a joint venture with Anthem Software Pty Ltd (ACN ) ( Anthem ) to incorporate and operate ineedaservice Pty Ltd (ACN ) ( INAS ), in which Capricorn is the majority shareholder holding 51% of issued shares. INAS was formed to manage, grow and develop web based lead generation technology services to the automotive industry in Australia and New Zealand and any other industry agreed to by the parties. INAS has launched and operates online car booking services available to members of the public which list the automotive businesses of Authorised Purchasers. The activities of CTS are currently limited to holding the shares in INAS and constitute a minor operating activity of Capricorn Capricorn Insurance Services Pty Limited Capricorn Insurance Services Pty Ltd (ACN ) ( CIS ) is a wholly owned subsidiary of Capricorn. It was established in December 2011 to assist Authorised Purchasers obtain insurance for types of businesses and activities for which Capricorn Mutual does not offer protection. Capricorn Insurance Services Pty Ltd holds an Australian Financial Services Licence (AFS Licence No ) and is authorised to provide financial product advice and deal in general insurance. Revenue received by CIS is included as part of the $13.3 million of other revenue reported by Capricorn in its Half Year Report ($25.3 million for the year ended 30 June 2015 as per Capricorn s Annual Report) Capricorn Risk Services Pty Limited Capricorn Risk Services Pty Ltd (ACN ) ( CRS ) is a wholly owned subsidiary of Capricorn. As from 1 July 2014 it was appointed a Corporate Authorised Representative of both Capricorn Mutual Ltd (CAR No ) and Capricorn Insurance Services Pty Ltd (CAR No ) to provide services of sales promotion, distribution and servicing of their respective products and services. Details of the financial services that CRS is authorised to provide on behalf of Capricorn Mutual are set in the CML Financial Services Guide and in respect of Capricorn Insurance Services in the CIS Financial Services Guide. The aforementioned Financial Services Guides do not form part of this Prospectus and are not to be interpreted as part of, nor incorporated into, this Prospectus. Revenue received by CIS is included as part of the $13.3 million of other revenue reported by Capricorn in its Half Year Report ($25.3 million for the year ended 30 June 2015 as per Capricorn s Annual Report).

25 Social Business Australia Pty Limited Social Business Australia Pty Ltd (ACN ) ( SBA ), a wholly owned subsidiary of Capricorn, was established to assist all forms of social business to develop and grow in the competitive environment of the real economy. Social businesses trade or undertake activities for social purpose and apply profit or surpluses to social benefit. SBA provides a platform for developments in the national and international social business movement to be shared with the Australian business community, the public and the media. The activities of SBA constitute only a minor operating activity of Capricorn and are not concerned with earning direct revenue Capricorn Underwriting Services Pty Limited Capricorn Underwriting Services Pty Ltd (ACN ) ( CUS ) is a wholly owned subsidiary of Capricorn. CUS holds an Australian Financial Services Licence (AFS Licence No ) and is authorised to provide financial product advice and deal in general insurance. CUS is currently dormant. It is intended that CUS be wound-up and that it surrender its Australian Financial Services Licence Capricorn 1974 Pty Ltd Capricorn 1974 Pty Ltd (ACN ) is a wholly owned subsidiary of Capricorn and has been established to hold property and property investments. It is the registered owner of Capricorn s corporate office located at 28 Troode Street, West Perth Capricorn s Strategy Ultimately, Capricorn exists to serve its Members, all of whom are in the automotive or allied industries. As a Member-owned business Capricorn puts the Member at the centre of everything it does and commits to making their business rewarding and easier. Preferred Suppliers are also a valued business partner in the Capricorn business model and look to Capricorn to assist with profitable business growth and quality service. Capricorn has a strategic plan which is reviewed on an annual basis. Fundamental to this strategic plan is the objective to drive profitable growth in Capricorn s core business of providing credit to Members by increasing the overall number of Members and encouraging increased spending by individual Members through their Capricorn Account. As well as continuing to foster strong relationships with Capricorn Members and Preferred Suppliers including through enhancing existing offerings outside of the core business of providing credit, the short to medium term focus will be on process improvement and investment in new internal systems and capability to provide a strong platform for this planned growth. Capricorn s membership has steadily grown over the years, which in turn has increased the volume of Account transactions processed. While current core systems have been modified over time to handle this growth they are approaching the end of their useful life and require replacement. Future growth will be dependent on the investment in processes, systems and capability that are required to support and drive growth in Capricorn s core business. Capricorn is currently in the execution phase of a significant multi-year program of work to replace core legacy technology with new systems. Capricorn commenced using the replacement system in the Automotive

26 25 Business early in the first quarter of 2016 and expects to commence using the replacement system in the Risk business in the first half of To also facilitate Capricorn s growth, there are two key programs underway. First is the Area Manager Growth Strategy within the automotive business to provide greater availability of the sales team to service current members and facilitate new member growth. Secondly, a complimentary growth strategy is also underway within Capricorn Risk Services to grow both Capricorn Mutual as well as the general insurance services business. In addition to the growth strategies, Capricorn is also developing a strategy to complement existing business and service models whilst growing member benefits. Capricorn recognises the potential risk associated with its Members operating solely within the automotive and allied industries. The automotive industry like many others face challenges such as industry consolidation, changes in technology and changes in market preferences and operating models. Capricorn has and will continue to identify and assess potential diversification opportunities that may allow it to leverage its current resources and capabilities to both reduce overall risk through diversification and improve returns to Members. The ability to diversify is in part dependent on the process improvements and investment in new internal systems Capricorn s Financial Arrangements Capricorn has banking facilities in Australia and New Zealand. Capricorn has transactional banking facilities to assist with payments to Preferred Suppliers, but primarily funds these by matching them with receipts from Authorised Purchasers paying their Accounts. Capricorn has provided the following bank guarantees: (a) (b) A guarantee of of $202, for the benefit of the landlords in respect of rental obligations concerning premises rented by Capricorn in Sydney, Australia; and A guarantee of $192, for the benefit of International Air Transport Association (IATA) in respect of Capricorn Travel s ongoing membership of IATA and access to airline ticketing systems. Capricorn must retain with its banker restricted cash deposits equal to the amount of each guarantee for so long as that bank guarantee is in place. Capricorn has an overdraft facility of $1 million (unused at the date of this Prospectus). Capricorn has no long-term borrowing facilities. For more information regarding Capricorn's financial position refer to Section 5, Capricorn's Annual Report and Capricorn s Half Year Report Dividends Capricorn has not adopted a dividend policy for the Shares. Dividends may only be declared by Directors and in the circumstances permitted by the Corporations Act and the Constitution. The Directors determines the quantum of dividend, if any, from year to year having regard to matters such as Capricorn s current

27 26 and expected financial performance in the subject and succeeding years, retained profits, future plans and available cash. Members may elect to receive their dividend by way of further Shares under the Dividend Reinvestment Plan where permitted. For more information on the rights of Members to receive dividends see section 3.1 (c) Rebates Capricorn's Constitution provides that Capricorn may pay rebates to Members and Authorised Purchasers that are either Qualified New Authorised Purchasers or Eligible Suppliers during a year calculated by reference to the purchases made through their Account. Rebates may be received as a cash payment or by way of further Shares if Members elect to use their rebate to purchase further Shares up to the maximum shareholding limit per Member where permitted by Capricorn. As part of the Dividend Reinvestment Plan Capricorn will record whether a Member has elected to receive all rebates as further Shares. If the rebate received by a Member who has elected to receive all rebates as further Shares, where permitted by Capricorn, is not a whole Australian or New Zealand dollar amount then the remaining rebate is credited to their Account or any of their Accounts. Authorised Purchasers that are also either Qualified New Authorised Purchasers or Eligible Suppliers are eligible to receive any rebates declared subject to Directors discretion and the operation of Capricorn s rebate policy but are not eligible to receive those rebates as Shares. For more information on rebates see section 3.4(f) Dividend Reinvestment Plan Capricorn operates a Dividend Reinvestment Plan. Members may receive any dividend by way of further Shares issued under the Dividend Reinvestment Plan up to the maximum shareholding limit per Member provided that Capricorn has not suspended or withdrawn (in full or in part) the Dividend Reinvestment Plan or option at or prior to the time of declaring any Dividend. The Dividend Reinvestment Plan operates as follows: (a) Capricorn will record whether a Member has elected to receive dividends as further Shares under the Dividend Reinvestment Plan or as cash payment direct credited to a bank account of their choice. Members may change their election by notifying Capricorn. (b) There is no fee or discount associated with Shares issued under the Dividend Reinvestment Plan. (c) Shares issued under the Dividend Reinvestment Plan are the same class of Shares as already held by the Member (e.g. a Member that holds Shares in the Australian Geographic Region Class is issued further Shares in the Australian Geographic Region Class under the Dividend Reinvestment Plan). (d) If the dividend received by a Member participating in the Dividend Reinvestment Plan is not a whole Australian or New Zealand dollar amount then the remaining dividend is held by Capricorn and added to any future dividend payable to the Member (or paid to the Member on leaving Capricorn).

28 Rights and Liabilities Attached to Shares

29 28 3. RIGHTS AND LIABILITIES ATTACHED TO THE SHARES The rights and liabilities attached to the Shares are defined in Capricorn s Constitution, which is lodged with ASIC and incorporated by reference into this Prospectus. A copy of Capricorn s Constitution is available free of charge on request or may be viewed in the Corporate Documents section of the Capricorn website Rights Attaching To the Shares (a) Voting Rights Australian Geographic Region Class and New Zealand Geographic Region Class Shares At general meetings of Capricorn each Member that holds Shares in the Australian Geographic Region Class or New Zealand Geographic Region Class has one vote: (i) (ii) (iii) on a show of hands; by Direct Vote (a Direct Vote is counted in determining any resolution that is considered at a meeting of Members on a show of hands or by poll); and on a poll, irrespective of the number of Shares held. Each such Member may vote by postal ballot on the election of a representative Director of the zone that they are enrolled in (see description below under the heading Election, Appointment and Removal of Directors ). Each Member has one vote irrespective of the number of Shares in Capricorn held. All Regions Class Shares Members that hold All Regions Class Shares are only entitled to vote on resolutions considered at separate general meetings of Members that hold All Regions Class Shares. In respect of such resolutions, every holder of Shares in the All Regions Class has one vote only: (i) (ii) (iii) on a show of hands; by Direct Vote (a Direct Vote is counted if a resolution considered at a separate general meeting of holders of All Regions Class Shares is decided on a show of hands or by poll); and on a poll, irrespective of the number of Shares held. Each such Member is not eligible to vote in any election of a representative Director in any zone or at any general meeting of Capricorn. Proxies and Direct Voting Members are entitled to vote in person, through a proxy or by Direct Vote. Under Capricorn s Constitution the Directors may determine which resolution may be voted on by Members casting Direct Votes.

30 29 Where Direct Voting is permitted, Directors have approved regulations that determine the form, method and manner of casting Direct Votes and the time in which they must be received by Capricorn. These regulations provide for Direct Votes to be cast in writing or electronically (through the Capricorn Online Shareholder Centre). These regulations are incorporated by reference into this Prospectus and a copy of them is available free of charge on request or may be viewed at the Corporate Documents section of the Capricorn website Representatives A Member that is a body corporate may appoint an individual as a representative when exercising their applicable voting rights. A Member may not be represented by more than one representative in respect of a vote. Election, Appointment and Removal of Directors Members that hold Australian Geographic Region Class or New Zealand Geographic Region Class Shares are enrolled in a geographic zone as recorded in the Capricorn Constitution based on their primary place of business. Capricorn s Constitution establishes the following geographic zones in Australia and New Zealand: Western Australia; New South Wales and the Australian Capital Territory; Victoria and Tasmania; South Australia and the Northern Territory; Queensland; and New Zealand. The zone of South Africa is not applicable as it has no Members. Directors may designate other countries as additional geographic zones. Members in a geographic zone that has at least 350 Members (excluding Western Australia which is not subject to this criteria but is eligible to elect a Director) are entitled to elect a Director for that geographic zone only who must be a Member, or affiliated with a Member as described in the Capricorn Constitution, in that geographic zone. If a geographic zone is not entitled to elect a Director, then Members in that zone are entitled to vote for the election of a Director in the Western Australia geographic zone. Elections are conducted by postal ballot and Directors may also determine that other forms of Direct Voting, such as electronic voting, are permitted. The result of the election is determined on a first past the post basis. Directors elected by Members of a geographic zone are appointed for a term of four years, after which they may seek re-election subject to the restrictions on maximum Director terms discussed below. Independent Directors can be appointed by the Directors for a term of no more than 4 years, but their appointment must be ratified by ordinary resolution at the next Members general meeting after their appointment. The Constitution provides that Members may terminate the appointment of an independent Director by Special Resolution or the independent Director may otherwise be removed in accordance with the Corporations Act. Capricorn s Constitution permits a maximum of three independent Directors.

31 30 Any Director elected or appointed after 27 October 2012 may serve as a Director for a maximum term of 12 ½ years, whether served consecutively or cumulatively. Directors holding office on 26 October 2012 may serve as a Director for a maximum term of 16 ½ years, whether served consecutively or cumulatively. Members may remove a Director by ordinary resolution in accordance with the Corporations Act. (b) Notice of Meetings All Members are entitled to receive: (i) (ii) notice of every general meeting of Capricorn; and all notices, reports, accounts and other documents required to be sent by Capricorn to its Members under Capricorn's Constitution or the Corporations Act. (c) Right to Dividends Dividends are determined by the Directors at their discretion and in accordance with the Corporations Act and the Constitution. A dividend rate for all Shares held at the record date, which the Directors have determined should be eligible for a dividend, is determined based on overall contributed equity in Australian dollar terms for such eligible share classes as at the date the dividend rate is determined by the Directors. The dividend paid to any such eligible share class is based on this dividend rate in local currency notwithstanding any foreign exchange movement between the date the dividend is determined and paid. Directors reserve the right to change such approach at any time and determine dividends per class of Shares as permitted by Capricorn s Constitution. Members may elect to use dividends to participate in the Dividend Reinvestment Plan (if on offer), subject to the Member continuing to satisfy the Membership Criteria at that point in time and any maximum share limit per Member. Sections 2.6 and 3.2(c) set out Capricorn s position on declaring dividends and its potential ability to withhold funds from declared dividends in certain circumstances. (d) Transfer of Shares A transfer of Shares must be in writing in the usual form or in another form approved by the Directors. The Directors may register the transferee as a Member and retain the transfer document. A Member remains a Member of Capricorn until any transfer of Shares is registered and the name of the transferee is entered on Capricorn's register of Members.

32 31 Directors right to refuse a transfer The Directors may refuse to register a transfer of Shares if: (i) (ii) (iii) the Shares being transferred are not fully paid (Capricorn currently only issues fully paid Shares); Capricorn has a lien on the shares; or the transferee is ineligible to be a Member of Capricorn or is refused membership by the Directors in their absolute and unfettered discretion, and the Directors are not required to give the reasons for any refusal. If Directors refuse to register a transfer, the Directors must give written notice of the refusal to the Member who lodged the transfer within two months of its lodgement with Capricorn. (e) Rights upon winding-up of Capricorn Any distributions on Shares in the event of the winding-up of Capricorn must take place in accordance with any terms and conditions on which the Shares were issued or deemed to be issued. Subject to the operation of the Corporations Act, if Capricorn is wound up the liquidator may, with Special Resolution approval of Members and after payment of Capricorn's liabilities, do any or all of the following: (i) (ii) divide amongst the Members in kind, the whole or any of the property of Capricorn. For this purpose, the liquidator may: A. set a value which he considered fair on any property to be so divided; and B. may determine how the division is to be carried out as between the Members or different class of Members (i.e. the Geographic Regions classes and All Regions Class of Shares); and/or vest the whole or any part of that property in trustees of those trusts for the benefit of the contributories as the liquidator thinks fit, but so that no Member may be compelled to accept any shares or other securities in respect of which there is any liability Liabilities and obligations attaching to the Shares (a) Share Buy-Backs At the Annual General Meeting on 23 October 2015, Members passed a Special Resolution that authorised Capricorn to enter into share buy-back agreements with Members on the following terms: (i) (ii) Capricorn may enter into Buy-Back Agreements with eligible Members during the 12 months following the Annual General Meeting, ending on 22 October 2016; Buy-Back Agreements may only be entered into by Capricorn with a Member who (with each category below to be considered separately and independently): A. does not meet the Membership Criteria; or B. is subject to a compulsory sale of Shares by Capricorn in accordance with the Capricorn Constitution with the view to Capricorn becoming the purchaser of those Shares; or

33 32 (iii) (iv) (v) (vi) (vii) C. fails to comply with the terms of their Authorised Purchaser Agreement (as may be amended from time to time) or whose Authorised Purchaser Agreement is terminated or whose credit facility is fully withdrawn under their Authorised Purchaser Agreement or equivalent; or D. requests in writing to leave Capricorn; or E. has received a request in writing by Capricorn to leave Capricorn because they have failed to discharge their obligations to Capricorn, whether arising out of the Constitution or out of any contract, or because the Member has engaged in conduct considered by the Directors to be detrimental to Capricorn; or F. requests a partial buy-back of their shareholding, providing that: I) the Member would still hold the minimum number of required Shares in Capricorn; and II) the partial buy-back is approved by the Directors in their absolute and unfettered discretion. The Directors will not authorise the partial buy-back of Shares issued to any Member less than 12 months before the partial buy-back request is made unless the Directors consider it is in the best interests of Capricorn to do so. The purchase price payable by Capricorn per Share under a Buy-Back Agreement will not exceed the Issue Price per Share; Capricorn will not purchase Shares under a Buy-Back Agreement if doing so would materially prejudice Capricorn s ability to pay creditors; The total number of Shares which Capricorn may buy-back cannot exceed 17,163,169 Shares (being 20 per cent of the smallest number of the share capital of Capricorn during the 12 months prior to the Annual General Meeting at which the entry into Buy-Back Agreements was approved); In accordance with the Corporations Act, Members who cast a vote or had their vote counted by Capricorn in favour of the Special Resolution authorising Capricorn to enter into Buy-Back Agreements cannot themselves enter into Buy-Back Agreements. While it is the current intention of Directors to seek annually Members' approval to a similar Special Resolution authorising Capricorn to buy back Members shares, there can be no guarantee that such future resolution will be passed. If it is not passed Capricorn would not be able to buy back Shares from Members at their request unless another meeting was convened and a special resolution passed in accordance with the Corporations Act approving the terms of a further share buy-back agreement. If all of a Member s Shares were bought back the Member would no longer be entitled to the rights and privileges attached to being a Member of Capricorn (information about which is set out in Section 3.4), which may have additional adverse financial consequences for the Member.

34 33 (b) Compulsory Sale of Member's Shares Capricorn's Constitution provides that Capricorn may sell a Member s Shares if: (i) (ii) the Members resolve by Special Resolution that a Member has: A. failed to discharge their obligations to Capricorn, whether arising out of the Constitution or out of any contract; or: B. engaged in conduct detrimental to Capricorn; or Capricorn notifies a Member that the Member is an inactive Member (which means the Member has not acquired any goods or services on their Account from Capricorn, any member of the Capricorn Group or a Preferred Supplier for a continuous period of three months). Conditions of a Compulsory Sale In any compulsory sale of Shares, the sale may be in a manner determined by the Directors and the sale proceeds (less any expenses incurred in connection with the compulsory sale) may be either paid to the Member or set-off against amounts owing to Capricorn by the Member. Accordingly, if a Member's Shares are compulsorily sold, the Member may not receive the full amount of the Issue Price of the Shares. Further, the Member would no longer be entitled to the rights and privileges attached to being a Member of Capricorn (information about which is set out in section 3.4), which may have additional adverse financial consequences for the Member. (c) Lien over and forfeiture of Shares The Shares being offered under this Prospectus are to be fully paid. Therefore, successful Applicants will not be subject to any calls for unpaid money in connection with any issue of Shares under this Prospectus. Capricorn has a lien over a Member s Shares and any dividends or other amount payable to the Member regarding those Shares in respect of any unpaid monies the Member may owe to Capricorn on any basis (for example, outstanding Account balances). Capricorn has the power to sell or cancel and re-allot a Member s Shares over which Capricorn has a lien. Capricorn may also issue a notice to a Member who has unpaid amounts owing to Capricorn for any reason (not just in respect of the Shares, but generally), demanding that the amounts are paid in 14 days, and state that if the amounts are not paid within such period the Member s Shares will be liable to be forfeited Alteration of Capricorn's Constitution Capricorn's Constitution can only be modified or repealed by the passing of a Members' Special Resolution, which requires, amongst other things: (a) (b) at least 21 days prior notice to be given to Members; and the resolution to be passed by at least 75% of the votes cast by Members entitled to vote on the resolution.

35 Potential entitlements associated with being a Member In addition to the rights attaching to the Shares, Members of Capricorn may be eligible for the following membership entitlements: (a) Access to Trade Credit Capricorn provides Accounts to Authorised Purchasers which generally offer them instant credit through Capricorn for purchases of goods or services from Preferred Suppliers or from Capricorn and its related companies. This means they do not need to make individual credit or payment arrangements with each Preferred Supplier or with Capricorn and its related companies. Purchases in each month are generally payable by the last business day of the following month. The terms on which this credit is provided are set out in the Authorised Purchaser Agreement Terms and Conditions (as amended from time-to-time) which are available from Capricorn on request or may be viewed online at the Corporate Documents section of the Capricorn website and have been lodged with ASIC and are incorporated by reference in this Prospectus. Under the Authorised Purchaser Agreement Terms and Conditions Capricorn can vary and/or withdraw any credit or the terms on which the credit is provided at any time and in its absolute and unfettered discretion. Any Authorised Purchaser as holder of an Account is able to order goods and services from a range of Preferred Suppliers and Capricorn and its related companies. Capricorn issues Authorised Purchasers with a monthly statement that records purchases from Preferred Suppliers and Capricorn and its related companies placed on their Account during the preceding month (or previous months, if applicable). Authorised Purchasers are required to pay for purchases placed on the Account by the last business day of the calendar month in which the statement is issued. If an Authorised Purchaser fails to pay their Account on time interest, default and administrative charges may apply. (b) Access to Extended Credit Members may apply for extended credit under Capricorn s range of extended lending products, which includes the financing of capital equipment through CAPezifinance and insurance premium financing through premium funding. Capricorn is not obliged to grant an extension of credit to Members. As well as providing extended credit directly to Members, Capricorn, acting through its wholly owned subsidiary Capricorn Society Financial Services Pty Ltd (Australian Credit Licence: ), also acts as an introducer and broker to assist Authorised Purchasers and the general public obtain finance from third parties for both commercial and domestic purposes. (c) Competitive Pricing Authorised Purchasers benefit from competitive prices (although not necessarily the lowest) when placing purchases from Preferred Suppliers on their Account. While Capricorn does not directly negotiate Preferred Supplier prices, Preferred Suppliers are incentivised to ensure that Authorised Purchasers receive competitive prices so that they maximise their sales to Authorised Purchasers and maintain their status as a Preferred Supplier.

36 35 (d) Simplified Accounting An Authorised Purchaser may use their Account to make purchases from Preferred Suppliers or Capricorn and its related companies they do not need to make individual credit or payment arrangements with each Preferred Supplier or Capricorn and its related companies. Authorised Purchasers receive one statement for all their purchases made on their Account during each month. Authorised Purchasers may pay the Account using a variety of payment options, including by credit card and direct debit. Members or Authorised Purchasers that are also Preferred Suppliers may also use Reward Points to pay their Account in part or in full. (e) Capricorn Rewards Program Capricorn operates the Capricorn Rewards Program. Authorised Purchasers are generally awarded 1½ Reward Points for every $1 or NZ$1 spent through their Account on eligible purchases of goods and services from Preferred Suppliers or Capricorn s related companies. For purchases from a small number of Preferred Suppliers, Reward Points are awarded at a lower rate of 1 Reward Point for every $1 or NZ$1 spent. Capricorn or Preferred Suppliers may also run promotions where Authorised Purchasers are awarded bonus or additional Reward Points on particular purchases. Reward Points are not awarded for purchases made directly from Capricorn or in respect of the Capricorn Convention unless the contrary is expressly stated as part of any promotion. Reward Points may only be redeemed by Members or by Authorised Purchasers that are also Preferred Suppliers. All other Authorised Purchasers may accrue Reward Points but cannot redeem them until becoming a Member. Reward Points are redeemed in the same currency in which they were awarded on that basis that 100 Reward Points is generally equivalent to $1 or NZ$1. Options for redemption include the following: (i) (ii) (iii) travel bookings through Capricorn Travel (Australia only); vouchers from various retailers (a minimum redemption of Reward Points sufficient to obtain $100 or NZ$100 of vouchers is required); or payment in part or full of a Member s Account. Reward Points are awarded, redeemed and otherwise dealt with in accordance with the Capricorn Rewards Program Terms and Conditions. The aforementioned Capricorn Rewards Program Terms and Conditions do not form part of this Prospectus and are not to be interpreted as part of, nor incorporated into, this Prospectus. (f) Rebates Capricorn's Constitution provides that Capricorn may pay rebates to Members during a year calculated by reference to the business done by the Member with Capricorn during the year. Rebates are only payable out of the profits of Capricorn and may be declared only by the Directors. If declared, rebates are paid annually.

37 36 The present rebate policy is to calculate rebates on the volume of purchases placed on the Member s Account as a proportion of all purchases placed on all Member Accounts. For example, if the total trading with Preferred Suppliers by all Capricorn Members through their Accounts was $100,000 and a particular Member s trading with Preferred Suppliers through their Account was $100 then as that Member accounted for 0.1% (1/1000 th ) of the total trading, they would be entitled to 0.1% (1/1000 th ) of any rebate declared. Members may elect to use their rebates to purchase further Shares. There is no current intention on the part of Directors to change the rebate policy. Authorised Purchasers that are also either Qualified New Authorised Purchasers or Eligible Suppliers are also eligible to receive any rebates declared subject to the Directors discretion and the operation of Capricorn s rebate policy. Capricorn has not paid a rebate in respect of any of the last 5 financial years. (g) Capricorn Convention and Events Capricorn hosts a range of industry events which Authorised Purchasers and Preferred Suppliers may attend, including the following: (i) (ii) (iii) Capricorn's Convention, which is usually held approximately once every months in an overseas location; Dinner and Displays, which include Preferred Supplier trade shows, which are usually held annually in each geographic zone in which Capricorn operates; and Other networking and training events, which are held throughout metropolitan and regional areas in each geographic zone in which Capricorn operates. Authorised Purchasers may be entitled to stagger the payments for the Convention over a period of time, rather than having to pay the Convention costs up front. (h) Publications and Information Capricorn makes three regular publications available to Authorised Purchasers: (i) (ii) (iii) Purple Pages, which is a trade directory of all Preferred Suppliers in their particular geographic zones that is generally provided annually; Ignition, which is a magazine provided to Authorised Purchasers and Preferred Suppliers that contains a wide range of information including advertising of the services of Preferred Suppliers, Capricorn and related companies that may be of interest or relevance to Authorised Purchasers; and Capricorn Sparks, which is a catalogue of special offers and advertisements from Preferred Suppliers provided to some Authorised Purchasers, dependent on their applicable geographic zone that is generally provided monthly. Capricorn's website, allows Authorised Purchasers to review up to date information, including for example details about their Account and any Preferred Supplier specials on offer. Capricorn also discloses on its

38 37 website any continuous disclosure notices issued (which will be included in the Corporate Documents section of the website). (i) Capricorn Travel Capricorn Travel is a travel agency through which Australian Authorised Purchasers, and also the general public, may book travel. Capricorn Travel arranges travel requirements for Authorised Purchasers attending the Capricorn Convention or other events. Authorised Purchasers may charge all services booked through Capricorn Travel to their Account and earn Reward Points on them (other than for Capricorn Convention). (j) Capricorn Mutual Authorised Purchasers are eligible to become members of Capricorn Mutual (AFS Licence No ), which offers risk protection products, an alternative to insurance, for personal and business risks on a discretionary basis. Products offered by Capricorn Mutual are developed to suit the needs of Authorised Purchasers in general and include business, home and vehicle protection. Capricorn Mutual is not an insurance company it is a discretionary mutual fund that is operated solely for the benefit of its members. (k) Capricorn Insurance Services Through its wholly owned subsidiary Capricorn Insurance Services Pty Ltd, Capricorn assists Authorised Purchasers obtain insurance for types of businesses and activities for which Capricorn Mutual does not offer protection. Capricorn Insurance Services Pty Ltd holds an Australian Financial Services Licence (AFS Licence No ) and is authorised to provide financial product advice and deal in general insurance Entitlements of a Qualified New Authorised Purchasers or Authorised Purchaser in Australia (a) Capricorn Membership Structure Membership in Australia Membership of Capricorn in Australia has three stages. (i) Typically a person first joins Capricorn by applying to become an Authorised Purchaser and agreeing to the Authorised Purchaser Agreement. At this stage, if the application to become an Authorised Purchaser is accepted, they satisfy some, but not all, of the Membership Criteria set by Capricorn. Generally the unsatisfied criteria relates to purchasing volume targets that may be set and assessed over a 3 to 12 month period.

39 38 (ii) (iii) An Authorised Purchaser becomes a Qualified New Authorised Purchaser once they have satisfied all of the applicable Membership Criteria, typically by meeting the purchasing volume targets over a period of time. A Qualified New Authorised Purchaser is eligible to apply for Shares under this Prospectus. Once a Qualified New Authorised Purchaser purchases Shares they are a Member. Capricorn may terminate arrangements with any Authorised Purchaser that fails to become a Member within 12 months or earlier in Capricorn s absolute and unfettered discretion excluding any implied term of good faith (either by failing to satisfy all the Membership Criteria and become a Qualified New Authorised Purchaser or, after becoming a Qualified New Authorised Purchaser, failing to purchase Shares). This is consistent with Capricorn s cooperative principles of existing to serve its Members and limiting membership to only those people that make, or are likely to make, an economic contribution to Capricorn through actively using the Account. Membership in New Zealand In New Zealand, historically due to the different regulatory restrictions around offering Shares, a person will generally apply for Shares and to become an Authorised Purchaser at the same time. If the Application for membership is accepted by Capricorn, which requires the person to otherwise satisfy the applicable Membership Criteria, they will join immediately as a Member. Preferred Suppliers as Members and Authorised Purchasers A Preferred Supplier, or Authorised Purchaser that is connected to a Preferred Supplier (including by being a related party to the Preferred Supplier or under common control with a Preferred Supplier) may also become a Member of Capricorn through the purchase of All Regions Shares. The stages of membership for a Preferred Supplier or Authorised Purchaser connected to a Preferred Supplier are similar to those stages described above for membership in Australia. A Preferred Supplier or Authorised Purchaser connected to a Preferred Supplier must (if they have not already) first apply to become an Authorised Purchaser and agree to the Authorised Purchaser Agreement. At this stage, if the application to become an Authorised Purchaser is accepted, they satisfy some, but not all, of the applicable Membership Criteria set by Capricorn. An Authorised Purchaser that is a Preferred Supplier becomes an Eligible Supplier once they have satisfied all applicable Membership Criteria, typically by Capricorn assessing the Preferred Supplier as being a small to medium enterprise capable of purchasing meaningful volumes through an Account. An Eligible Supplier, or an Authorised Purchaser connected to an Eligible Supplier which is also capable of purchasing meaningful volumes through an Account, is eligible to purchase Shares under this Prospectus. Once an Eligible Supplier, or an Authorised Purchaser connected to an Eligible Supplier, purchases All Regions Shares they are a Member.

40 39 (b) Entitlements of Authorised Purchasers that are not Members Authorised Purchasers that are not Members do not receive any of the rights associated with holding Shares as listed in Section 3.1 and in particular they do not receive voting rights or dividends. Authorised Purchasers that are not Members may receive most but not all - of the entitlements listed in Section 3.4, but will only receive any such entitlements on a temporary basis if they do not go on to become a Member. All Authorised Purchasers may accrue Reward Points but cannot redeem them prior to becoming a Member (unless they are also a Preferred Supplier). Authorised Purchasers are not eligible to receive rebates unless they are a Qualified New Authorised Purchaser or Eligible Supplier and then they may receive any rebates declared, subject to the Directors discretion and the operation of Capricorn s rebate policy.

41 Directors, Senior Management & Corporate Governance

42 41 4. DIRECTORS, SENIOR MANAGEMENT & CORPORATE GOVERNANCE 4.1. The Directors The Directors are responsible for protecting the rights and interests of Members and are accountable to them for the overall direction, performance and governance of Capricorn. The majority of Directors are drawn from the Members in the geographic zones in which Capricorn operates, as set out in Capricorn s Constitution. Only Members from a zone or an Eligible Affiliate as understood by reference to the Capricorn Constitution may put themselves forward as a candidate for election as a Director in any election held in that relevant geographic zone. Members in a zone are entitled to vote in any election of that zone s Member elected Director. Member elections are held in each zone every four years on a rotating basis. Members that hold All Regions Class Shares are not eligible to vote in any such elections. Prior to the Closing Date of this Offer it is planned that there will be an election held in 2016 for the South Australia and the Northern Territory geographic zone. The Board resolved in December 2015 to appoint Peter Stewart as a director to fill a casual vacancy created by the resignation of the previous director elected by Members of that zone and Peter Stewart commenced in January Director Stewart is eligible to seek candidacy for this election. Directors may also appoint up to three independent (i.e. non-member) non-executive Directors. Directors Rathie and Pirone have been appointed as independent nonexecutive Directors. All of Capricorn s Directors are non-executive Directors. At the date of this Prospectus, Capricorn s Directors are as follows: Name Member Geographic Zone Russell Becker (Chair) Yes New South Wales and the Australian Capital Territory Philip Saxton Yes New Zealand Peter Stewart Yes South Australia and the Northern Territory David Kemp Yes Queensland Mark Cooper Yes Victoria and Tasmania Julie Wadley Yes Western Australia Bruce Rathie (Vice Chair) No Not applicable Independent Director Mario Pirone No Not applicable Independent Director

43 Director Profiles All Member elected zone-based Directors are and have been active business operators in an automotive business in the geographical region from which they have been elected. The independent Directors bring a set of skills and expertise that compliments the experience and expertise of the Member directors. Section 2 of the Corporate Governance Statement of the Annual Report contains a profile of current Directors Becker, Wadley, Kemp, Cooper, Rathie and Pirone. Director profiles for Directors Saxton and Stewart were not included in the Annual Report as each was appointed as a Director subsequent to the Annual Report being published. Profile for Directors Saxton and Stewart are set out below:- Philip Saxton Philip was born in 1969 and has been involved in the automotive industry for over 25 years beginning with an apprenticeship in an all makes and model workshop. Philip went on to achieve an Advanced Trade Certificate and then moved to a local Toyota dealership in the role of After Sales Operation Manager. From there Philip pursued his dream of setting up and running his own business. Philip is the owner and operator of two automotive workshops in the Wellington region and has been a Capricorn Member for over 10 years. Philip is a Member of the New Zealand MTA, current President of the MTA Wellington and current Chairman of the MTA National Working Group. Over the past 10 years he has been involved in several voluntary community organisations and is the current President of the Boulcott Preservation Society, a not for profit organisation aimed to retain the character of the region. Philip is married to Hayley and they have 3 sons. Philip is excited to have joined the Capricorn Board and to have the opportunity to act in the best interests of all Capricorn Members. Peter Stewart Peter was born in 1953 and has been involved in the automotive industry for almost 20 years starting with the purchase of Rowell & Searle Auto Transmissions Pty Ltd in Adelaide. Peter has been committed to his business and the broader automotive industry in general, sitting on a number of Automotive Industry Committees. Peter has been a Capricorn Member since 1999, is currently an IAME Member and is on the MTA (SA) Automotive Repair Division Committee and RAA Approved Repairers Committee. Peter holds a Diploma and Advanced Diploma in Teaching as well as a Diploma and Certificate IV in Automotive Business Management. His business acumen was recognised with Rowell & Searle winning South Australian Small Business of the Year in Peter is married to Vicki with 4 adult children. Peter has been appointed to the Board to fill the casual vacancy for Zone 4 (South Australia/Northern Territory) and is a longstanding and passionate Capricorn Member. Peter is looking forward to the opportunity of representing all Members and contributing to the success of Capricorn. Peter is also a member of Capricorn s Audit & Risk Committee.

44 Director Remuneration and Shareholdings (a) Directors Interests Except as set out below, no Director (or entity in which they are a partner, director or associate) has, or has had in the two years before the date of this Prospectus, any interests in: (i) (ii) (iii) the formation or promotion of Capricorn; property acquired or proposed to be acquired by Capricorn in connection with its formation or promotion or the Offer; or the Offer, and no amounts have been paid or agreed to be paid and no value or other benefit has been given or agreed to be given to: (i) (ii) any Director to induce him or her to become, or to qualify as, a Director; or any Director of Capricorn for services which he or she (or entity in which they are a partner or director) has provided in connection with the formation or promotion of Capricorn or the Offer, except as disclosed in this Prospectus. (b) Directors Shares Details of the Shares held by Directors as at the date of this Prospectus are set out below: Shareholding of Directors No of Shares Russell Becker 73,115 Philip Saxton 40,864 David Kemp 3,386 Mark Cooper 64,674 Julie Wadley 13,117 Peter Stewart 71,365 Bruce Rathie Nil Mario Pirone Nil TOTAL 266,521 In all cases, the Shares are not held directly by a Director but by an affiliate company which is a Member and of which the Director is director. Under Capricorn s Constitution independent Directors (currently Directors Rathie and Pirone) cannot own Shares. All other Directors, being Members of Capricorn or interested parties in Members of Capricorn, are interested in the Offer to the extent that they, or the companies that they are affiliated with, will be eligible to apply for Shares under this Prospectus.

45 44 (c) Directors Remuneration Until otherwise determined by Member resolution, the maximum amount of non-executive Directors fees (including statutory superannuation entitlement) is set by Members at $920,000 for each financial year. A summary of Director remuneration for the year ended 30 June 2015 is set out below. Directors are also entitled to various non-cash benefits. Non-cash benefits may include Capricorn paying for the Director attendance at the Capricorn Convention, and paying Director phone and internet expenses. Remuneration of Directors for the year ended 30 June 2015 Salary and Non-Cash Superannuation Fees Benefits Total $ $ $ $ 2015 Colin Heavyside (6) 152,344-14, ,817 Russell Becker 100,096-9, ,605 Russell Green (7) 84,892-8,065 92,957 Mark Cooper 76,412-12,953 89,365 Julie Wadley (1) 57,017-5,417 62,434 David Kemp (2) 57,017-5,417 62,434 Wayne Negus (3) 9,278-4,922 14,200 Ross Pickering (4) 24,595-2,337 26,932 Bruce Rathie 89,214-8,475 97,689 Mario Pirone 81,612-7,753 89,365 Mark Coleman (5) 37,937-3,604 41, ,414-82, ,339 (1) Julie Wadley was elected as the Member Director of Zone 1 Western Australia on 18 October (2) David Kemp was elected as the Member Director of Zone 5 Queensland on 18 October (3) Wayne Negus ceased Directorship of Zone 1 Western Australia on 27 August (4) Ross Pickering ceased Directorship of Zone 5 Queensland on 18 October (5) Mark Coleman resigned as an Independent Director on 2 December (6) Colin Heavyside resigned as a Director on 15 October (7) Russell Green ceased Directorship of Zone 6 New Zealand on 23 October Senior Management Capricorn is led by an experienced Chief Executive Officer, Mr Greg Wall, and team of executives. Section 2 of the Corporate Governance Statement of the Annual Report contains a profile of Mr Greg Wall.

46 Corporate Governance Corporate governance is the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in companies. It influences how the objectives of the company are set and achieved, how risk is monitored and assessed and how performance is optimised. There is no single model of good corporate governance. For Capricorn what constitutes good corporate governance will evolve with its changing circumstances and as such will be tailored to meet those circumstances. Capricorn has voluntarily adopted the recommendations in the Australian Securities Exchange Corporate Governance Council paper Corporate Governance Principles and Recommendations 3rd Edition (which is acknowledged as best practice within Australia) to the extent that they are complementary and would add value to the operations of Capricorn. Details of Capricorn s Corporate Governance policies and procedures are set out in the Corporate Governance Statement of the Annual Report which may be viewed online in the Corporate Documents section of the Capricorn Website at

47 Financial Information about Capricorn

48 47 5. FINANCIAL INFORMATION ABOUT CAPRICORN 5.1. Financial Performance and Position of Information A detailed financial position of Capricorn and the Capricorn Group is provided in the Annual Report for the Year ended 30 June 2015 and in the Half Year Report for the six months ended 31 December 2015, including in each a Statement of Financial Position, Statement of Profit or Loss, Statement of Other Comprehensive Income and Statement of Cash Flows. Both the Annual Report and Half Year Report have been lodged with ASIC for the purpose of being incorporated into this Prospectus pursuant to Section 712 of the Corporations Act Effect of the Offer on the Financial Position of Capricorn As set out in Section 1.2 under the heading What is the purpose of the Offer and how will the proceeds be used? the funds raised under this Offer will be used by Capricorn for working capital requirements and other general corporate purposes. The purpose of the Offer is not tied to raising capital for any specific or immediate financial purpose of Capricorn. It is to provide access to membership of Capricorn. As at 31 December 2015 (as per Capricorn s Half year Report), Capricorn had cash and cash equivalent assets and term deposits of $50.1 million inclusive of restricted cash deposits, compared to $64.3 million at 30 June 2015 (as per the Annual Report)). The amount of funds raised under the Offer, and its effect on the financial position of Capricorn, cannot be readily assessed as it will depend on the number and type of Shares applied for. The expenses of the Offer will be incurred and paid by Capricorn in any event Cash Commitments Capricorn has made no material cash commitments outside of its normal business activities Right to Obtain Copy of Financial Reports and Disclosure Notices A detailed financial position of Capricorn is set out in the Annual Report for the Year ended 30 June 2015 and the Half Year Report for the six months ended 31 December This has been supplemented by further information contained in this Prospectus. Both the Annual Report and Half Year Report have been lodged with ASIC for the purpose of being incorporated into this Prospectus pursuant to Section 712 of the Corporations Act. Capricorn will provide a copy of the Annual Report and Half Year Report, as lodged with ASIC, free of charge, to any person who asks for a copy of the document before the Closing Date by contacting Capricorn on (Australia) or (New Zealand). Alternatively, the 2015 Annual Report may be viewed on the Capricorn website as part of the Corporate Documents section at

49 Investment Risk

50 49 6. INVESTMENT RISKS Before accepting the Offer, you should read this Prospectus in its entirety and, in particular, consider whether Capricorn Shares are suitable securities for you to acquire, having regard to your own investment objectives, personal and financial circumstances and the risk factors that could affect the financial performance of Capricorn. The following are the key risk factors associated with Capricorn and any investment in Shares. The risk factors have been categorised as follows: (a) (b) (c) Risks specific to the Shares; Risks specific to the operations of Capricorn; and General risks associated with any investment in shares. This list of risks is not exhaustive. These risk factors may, individually or in combination, materially and adversely affect the future profitability, financial position, financial performance, cash flows, growth of Capricorn, the value of the Shares, the outcome of any investment in Capricorn and the entitlements associated with being a Member of Capricorn. Some of the risks may be mitigated by the use of safeguards and appropriate systems and actions put in place by Capricorn Risks specific to the Shares There are specific risks associated with the rights attached to the Shares. In addition, there are risks associated with the other entitlements associated with being a Member that may affect the value of any investment in the Shares. (a) Capricorn may change the terms on which the Account or other credit is provided All Members are also Authorised Purchasers and have one or more Accounts with Capricorn. Capricorn may alter the terms and conditions on which the Account is provided. In particular, Capricorn has the right to withdraw or limit credit provided via the Account without notice. Capricorn may also make other non-credit related changes to the Account on no less than 30 days written notice. If Capricorn exercises such rights there is a risk that the Account and, in particular, the credit via the Account is no longer available or only available in a form that would no longer meet the needs of a Member. Further, as ongoing operation of the Account in accordance with its terms and conditions is part of the Membership Criteria, there is a risk that such changes may affect the ability of a Member to comply with the Membership Criteria on an ongoing basis. (b) Membership Criteria must be satisfied on an ongoing basis As set out in Section 1.2 under the heading What is the Membership Criteria for becoming a Member? Capricorn's Constitution requires that Members of Capricorn must meet the Membership Criteria on an ongoing basis.

51 50 There is a risk that a Member may at some point in the future no longer meet the Membership Criteria and therefore that a Member may become ineligible to remain a Member. This may be due to a change in the Member s circumstances or due to a change made by Capricorn which affects the Member s ability to meet the Membership Criteria (which may occur in the circumstances referred to in 6.1(a) above). In such circumstances, subject to complying with the requirements of the Corporations Act and Capricorn s Constitution, Capricorn may take steps that result in the removal of a person as a Member of Capricorn including through the compulsory sale of the Member s Shares. If a Member's Shares are compulsorily sold, the Member may not receive the full amount of the Issue Price of the Shares. Further, the Member would no longer be entitled to the rights and privileges attached to being a Member of Capricorn (information about which is set out in section 3.4), which may have additional adverse financial consequences for the Member. (c) Capricorn may not declare dividends There is no guarantee that dividends will be paid on Shares in the future as this is a matter that depends on the financial performance of Capricorn and is at the discretion of the Directors. The ability of Capricorn to pay dividends and the quantum thereof in the future is dependent upon many factors, including: (i) (ii) (iii) the ability of Capricorn to generate profits; the overall financial health of Capricorn; and the prevailing cash requirements of Capricorn at the relevant time and as part of future plans. Generally, there will be factors that affect the ability of Capricorn to pay dividends, and the timing of paying any dividends, that will be outside the control of Capricorn and its Directors. In addition, Capricorn has not adopted a dividend policy for the Shares. It has no stated intent about paying any particular portion of profits as a dividend. Even if Capricorn is in a financial position to pay a dividend, the Directors may not declare one. Instead they may decide that Capricorn is to retain funds, for example, for ongoing operational or development purposes. (d) There is no liquid market for Shares and no prospect of capital appreciation Shares in Capricorn are not liquid as explained below. There is no active secondary market for the Shares and Capricorn's Constitution prohibits Shares being quoted on any stock exchange. To provide some means for Members to sell their Shares Capricorn operates, and intends to continue to operate, a Share buyback program. In accordance with the Corporations Act, the Share buyback program requires annual approval by Members by way of Special Resolution.

52 51 The terms of the Share buyback program provide that the purchase price payable by Capricorn per Share will not exceed the Issue Price per Share. This, when combined with the illiquidity of the Shares and the limited transferability, means that there is no prospect of the Shares appreciating in capital value and Capricorn s ability to conduct any buyback will depend upon Capricorn having sufficient liquidity at the time of any buyback Risks Specific to the Operations of Capricorn There are specific risks associated with the operations of Capricorn which could have a material adverse effect on Capricorn s financial position, financial performance, cash flows or ability to pay dividends. (a) Capricorn does not have a diversified source of trading income Capricorn derives most of its trading income from the service fee it receives on payments made to Preferred Suppliers in respect of the purchases from Preferred Suppliers placed by Authorised Purchasers on their Accounts. Capricorn s material trading income is not from a diversified range of activities meaning any material adverse impact on the trading income from this source, including by way of bad debts as discussed in the subsequent risk factor, will negatively affect Capricorn s performance in a material way. Capricorn s Authorised Purchasers are predominantly from the automotive industry and allied industries. They are typically independent general repairers, specialist technicians and mechanics. Any material impact on this industry, including in terms of overall financial performance, demand factors, consolidation and downsizing, may negatively affect Capricorn s performance in addition to other broader industry risks described below. Capricorn has and will continue to identify and assess potential diversification opportunities that may allow it to leverage its current resources and capabilities to both reduce overall risk through diversification and improve returns to Members. There is however, no certainty that it will be successful in doing this or that the benefits of doing so will exceed any costs. (b) Capricorn is subject to credit risk Capricorn provides credit to its Authorised Purchasers via the Accounts and also extended lending to Members through CAPezifinance and other directlending products. Capricorn is exposed to credit risk in respect of the Account and other direct lending products. Capricorn is generally obliged to pay the Preferred Supplier for goods supplied to Authorised Purchasers regardless of whether or not the Authorised Purchasers pay Capricorn. There is a risk that the losses suffered by reason of Authorised Purchasers failing to meet their payment obligations or Members failing to make payments under their CAPezifinance and other direct-lending products could materially adversely affect Capricorn s financial position if these failures were widespread and substantial. (c) The value of Capricorn s investment portfolio may fluctuate

53 52 Capricorn s assets include an investment portfolio which included as at 31 December 2015 (as per the Half Year Report) investments in unit trusts and unlisted shares of $30.7 million ($29.5 million as at 30 June 2015 as per the Annual Report). Fluctuations in the value of the investment portfolio held by Capricorn due to prevailing market conditions can materially affect the financial performance of Capricorn. (d) Australian Competition and Consumer Act (formerly called Trade Practices Act) and ACCC Notification Capricorn is subject to regulation under the Australian Competition and Consumer Act 2010 (Cth) (ACCA) (as administered by the Australian Competition and Consumer Commission (ACCC)) in relation to its operating activities in all industries in Australia. Section 47 of the ACCA (formerly section 47 of the Trade Practices Act 1974 (Cth) (TPA)) prohibits the practice of exclusive dealing. Third line forcing is a type of exclusive dealing that occurs where a corporation offers to supply services to a person on the condition that the person will acquire goods or services from a third person. On 20 April 2007 Capricorn lodged a notification of conduct with the ACCC that certain conduct may have amounted to third line forcing on the basis that it could be seen that Capricorn was offering finance on the condition that a Member or Authorised Purchaser acquire products from Suppliers as nominated third parties. Under the former TPA (and now the ACCA) legal immunity was conferred by the ACCC upon Capricorn in relation to the notified conduct effective from 4 May 2007 under notification N The ACCC may act at a later stage to remove this immunity afforded if it is satisfied that the likely benefit to the public from the conduct will not outweigh the likely detriment to the public from the conduct. It is, however, unusual for the ACCC to remove the legal immunity provided by ACCC Notification, except where there is a change in circumstances. If the ACCC were to remove the immunity and it was subsequently found that Capricorn was or had been engaged in third line forcing, or other activities contrary to the ACCA then Capricorn s mode of business may need to change and Capricorn could face pecuniary penalties of the greatest of: (i) (ii) (iii) three times the benefit to Capricorn as a result of the conduct (if that can be determined); if it cannot, then 10% of the annual turnover of Capricorn; or $10 million, per each proven breach of the ACCA. Other remedies that the ACCC could pursue include orders for the payment of damages, injunctions and declarations. The Board considers that the risk of the ACCC removing the immunity and taking such action as remote.

54 53 (e) Capricorn is exposed to Capricorn Mutual due to financial support provided Capricorn has in the past and may in the future provide financial support to Capricorn Mutual. Capricorn has made loans totalling $4.9 million to Capricorn Mutual. Interest is charged on the loans. The repayment of this collective loan is fully subordinated at all times to all claims, demands, rights and causes of action of all Capricorn Mutual s creditors, unless and until ASIC gives a written consent otherwise. Capricorn has agreed with ASIC and Capricorn Mutual not to prove or claim, in the event of Capricorn Mutual s insolvency, for the repayment of the subordinated sum of $4.9 million in competition with any unsubordinated creditor or take any action which would in any way diminish any distribution, dividend or payment which, but for such proof, claim or action, an unsubordinated creditor would be entitled to receive. Capricorn has agreed with ASIC to not, at any time, demand or commence proceedings for repayment or recovery of the whole or any part of the subordinated sum of $4.9 million without the prior consent in writing of ASIC including where Capricorn Mutual is in breach of the terms of the loans. The loans of $4.9 million are fully impaired by Capricorn. (f) Capricorn is replacing its core information systems Capricorn continues a significant multi-year program of work to replace core legacy technology with new systems in both the Automotive and Risk Services businesses. Capricorn relies on its core information systems to provide its financial management system, share registry system and manage its relationships with Authorised Purchasers, Members and Preferred Suppliers as well as to service the members of Capricorn Mutual under Management agreements entered into with Capricorn Mutual by CRS and CMM as described in Section 7.2. Capricorn has and will invest significant funds in replacing these core systems. Capricorn commenced using the replacement system in the Automotive business early in the first quarter of 2016 and expects to commence using the replacement system in the Risk business in the first half of Capricorn will amortise approximately $1.5 - $2 million per year for the 10 year life of the assets. Any delays in implementing these replacement systems, any failure of these replacement systems to meet the business needs of Capricorn or any significant increase in the cost of replacement systems may adversely affect Capricorn s performance. (g) Capricorn is subject to IT related risks Capricorn relies on various information systems, technology and software products to efficiently carry out its business. While Capricorn has put in place procedures and plans to ensure that data is retained and that their systems are maintained to meet the demands of such business or venture, widespread system failures may negatively impact on Capricorn s performance. In particular, Capricorn relies on the CAPlink system to obtain information from most Preferred Suppliers about what purchases Authorised Purchasers have made from Preferred Suppliers using their Account.

55 54 Capricorn has licenced the CAPlink system from Anthem Software Pty Ltd, who developed the CAPlink system specifically for Capricorn. Anthem Software Pty Ltd provides ongoing maintenance and development services in respect of the CAPlink system. Capricorn relies on information from the CAPlink system to: (i) issue statements and make payment to Preferred Suppliers; (ii) issue statements to and seek payments from Authorised Purchasers; (iii) assist in managing the ongoing provision of credit to Authorised Purchasers. A failure of the CAPlink system could materially adversely affect Capricorn s business as it would have to rely on manual and other systems to identify purchases made by Authorised Purchasers from Preferred Suppliers using their Account. (h) Capricorn s arrangements with Preferred Suppliers may change To receive the trading benefits described above in Sections 3.4(a) to (f) in respect of any goods or services purchased, Authorised Purchasers must make the purchases on their Account and from Preferred Suppliers. For Capricorn to receive the service fee earned on payments made to Preferred Suppliers for Capricorn s trading income, Capricorn must have contractual arrangements in place with the Preferred Suppliers. Although Capricorn has contractual arrangements in place with each of Preferred Suppliers, there is a risk that the contractual arrangements may be terminated early or not be extended on expiry or, if extended, not be extended on as favourable terms. While Capricorn considers that it has sufficient resources and expertise to identify an alternative Preferred Supplier in the event that a Preferred Supplier ceases to have a contractual arrangement with Capricorn, there is a risk that the alternative Preferred Supplier may not offer the same trading terms or range of goods and services which may have an impact on both the financial position of Capricorn and the pricing of and goods and services available to Authorised Purchasers. (i) (j) (k) Competition An increase in competition from existing competitors, new competitors or both may negatively affect Capricorn s performance. Competition in the automotive industry, from where Capricorn draws its Authorised Purchasers, could lead to consolidation and down-sizing of independent automotive repairers which in turn could negatively affect Capricorn s performance. Personnel An inability to recruit and retain key personnel may negatively affect Capricorn s performance. Industry Risks Capricorn operates across a diverse range of industry sectors and, in particular, maintains a strong presence within the automotive and financial services industries. General risks in relation to these industries include the impact of changes in the supply chain, manufacturers and service/fund providers, regulation, competition, global demand for resources, climate change, political environment and changes in technology.

56 55 These industry risks may individually or in combination materially negatively affect Capricorn s performance. (l) Financial Services Risks There are a number of risks which arise directly or indirectly from the financial services provided by Capricorn in Australia and New Zealand either directly or through its related companies, including CSFS. These risks are described below: (i) (ii) Risks of bad debts. There is the risk in any direct lending by Capricorn that it may suffer losses by reason of a debtor failing to meet their contractual obligations or Capricorn failing to recover the full amount from the debtor or from any secured property. Cash flow risk. The risk in operating a direct funding model of Capricorn being unable to meet its financial commitments as and when they fall due as a result of a mismatch between funding commitments and cash flow. (m) (n) (o) Sovereign Risk Capricorn does business on a national and an international level. There are certain risks inherent in doing business on a national and an international level, such as unexpected changes in regulatory requirements, exchange controls, taxation, tariffs, customs and other trade barriers, difficulties in staffing and managing foreign operations, political uncertainty, expropriation, nationalisation and war. There may also be fluctuations in currency exchange rates, technology export and import restrictions or prohibitions and delays from customers, brokers or government agencies. Any of these could impact the success of Capricorn s operations. Exit or Retreat Capricorn operates across a diverse range of markets and any exit or retreat from a market may damage the Capricorn brand or incur liabilities or impose obligations on Capricorn on exit from such markets including but not limited to employee severance and redundancy payments and damages claims from Authorised Purchasers and Preferred Suppliers in the applicable market which may negatively impact on Capricorn s performance. Joint Venture Risks Capricorn is in joint control of INAS with Anthem. As with all joint ventures, key matters in respect of this joint venture business require the co-operation of the joint venture partners. Any material dispute or disagreement with Anthem may negatively affect the performance of INAS and any returns it provides to Capricorn. Any material dispute may have wider implications than just the joint venture company as Capricorn has a business relationship with Anthem outside of the joint venture. Anthem also licences to Capricorn and maintains the CAPlink system.

57 General Risks There are numerous widespread general risks associated with any shareholding in any company or business which could have a material adverse effect on the financial position, financial performance, cash flows or ability to pay dividends including in respect of Capricorn. (a) (b) (c) (d) Changes in Economic Conditions Capricorn and the industries it operates in are affected by domestic and international business conditions, general movements in local and international stock and property markets, investor sentiment, inflation rates, interest rates, exchange rates, the ability to access debt and equity capital markets and government fiscal, monetary and regulatory policies. Rapid changes or prolonged deterioration to any of the above factors may have a material adverse effect on the financial performance, financial position, cash flows, distributions and growth prospects of Capricorn. Force Majeure Events An act of terrorism, natural disasters, social disorder or outbreak of hostilities within or outside of Australia or New Zealand may adversely affect consumer spending and confidence. Any such event may affect the financial performance of Capricorn. Financial Risks Given the nature of commerce there remains an inherent risk that at some point in the future Capricorn may not be able to meet its ongoing operational and financial commitments. Regulatory Risks Capricorn is required to comply with a range of laws and regulations specific to Australia and New Zealand. These different regulatory regimes include laws and regulations specific to: (i) (ii) (iii) (iv) (v) (vi) the financial services, insurance and protection and travel industries; securities; privacy; competition; occupational health; and taxation laws. Changes in government legislation, policies and taxation regimes, accounting practices, government intervention and changes in government in Australia or New Zealand may affect the compliance costs and financial performance of Capricorn or continued operation of the Capricorn business model. Further, a failure to comply with laws and regulations could expose Capricorn to litigation or regulatory action which could have materially adverse effects on Capricorn s future financial performance. (e) Taxation Risks Any change to the current rate of company income tax in any of the jurisdictions where Capricorn businesses operate may impact on financial performance and cash flows and the ability to pay dividends, which could impact returns to Members. Any changes to the current rates of income tax applying to individuals and trusts may similarly impact on Members returns.

58 57 Tax liabilities are the responsibility of each individual Member. Capricorn is not responsible for taxation or penalties incurred by Members. Members should seek independent advice from their professional taxation advisors to ascertain the tax implications of their membership with Capricorn.

59 Additional Information

60 59 7. ADDITIONAL INFORMATION 7.1. Taxation Implications Neither Capricorn nor the Directors give any advice regarding the taxation consequences of you being issued Shares under this Prospectus, as it is not possible to provide a summary that adequately addresses the possible taxation position of all investors. If you are considering applying for Shares you should seek professional advice on the taxation implications of acquiring, holding or disposing of the Shares. Capricorn and its advisors and officers do not accept any responsibility or liability for any taxation consequences to investors in respect of the issue of Shares under this Prospectus. The tax treatment of dividends and specifically the availability of franking credits or imputation credits will vary for Members located in Australia and New Zealand depending on the tax paid by Capricorn in the respective jurisdictions. Capricorn advises all Members of the availability of franking credits or imputation credits when it announces a dividend (if any) Material Contracts (a) Capricorn Mutual Management Agreement CMM provides management services to Capricorn Mutual pursuant to a management agreement. During the term of the management agreement CMM will provide various services to Capricorn Mutual including management of the business operated by Capricorn Mutual, management and administrative services for Capricorn Mutual and its members, financial services and provision of advice to the directors of Capricorn Mutual regarding the application and effect of relevant laws and regulations. The services provided by CMM do not include the sales promotion and distribution of Capricorn Mutual products. CMM also grants Capricorn Mutual a non-exclusive licence to use all operating systems and software and intellectual property required to provide the services. CMM receives an annual fee (divided into equal monthly instalments) in connection with the performance of the Services for the relevant financial year. The management agreement will expire on 1 July 2019, unless the parties agree to extend the term. The agreement may be terminated by Capricorn Mutual with 60 days notice to CMM in various circumstances primarily related to a default or breach by CMM. CMM has a right to terminate the management agreement on 30 days notice or immediately, in various circumstances including where Capricorn Mutual is in default or breach, depending on the nature of the default or the breach. At the date of this Prospectus, neither party alleges or has asserted any default or breach. (b) Capricorn Risk Services Management Agreement CRS provides management services to Capricorn Mutual pursuant to a management agreement. During the term of the management agreement CRS will provide various services to Capricorn Mutual related to the sales promotion, distribution and servicing of Capricorn Mutual products to eligible potential and

61 60 existing Capricorn Mutual Members on a tied agent basis. CRS also grants Capricorn Mutual a non-exclusive licence to use all operating systems and software and intellectual property required to provide the services. CRS receives an annual fee (divided into equal monthly instalments) in connection with the performance of the Services for the relevant financial year. The management agreement will expire on 1 July 2019, unless the parties agree to extend the term. The agreement may be terminated by Capricorn Mutual with 60 days notice to CRS in various circumstances primarily related to a default or breach by CRS. CRS has a right to terminate the management agreement on 30 days notice or immediately, in various circumstances where Capricorn Mutual is in default or breach, depending on the nature of the default or the breach. At the date of this Prospectus, neither party alleges or has asserted any default or breach Litigation There is no material litigation, arbitration or legal proceedings pending against or involving Capricorn as at the date of this Prospectus Interests and Fees of Persons involved in the Offer Other than set out below or elsewhere in this Prospectus, none of the persons involved in the Offer and referred to below has, or has had, in the last two years, any interest in: (a) (b) (c) the formation or promotion of Capricorn; property acquired or proposed to be acquired by Capricorn in connection with its formation or promotion, or in connection with the Offer; or the Offer, and no amounts have been paid or agreed to be paid and no value or other benefit has been given or agreed to be given in connection with the formation or promotion of Capricorn or the Offer to a promoter or any person named in this Prospectus as having performed a function in a professional, advisory or other capacity in connection with the preparation or distribution of this Prospectus (or entity in which they are a partner or director). Capricorn Member Directors or their associated Member entity are however, eligible to acquire shares under the Offer. Lavan Legal have acted as lawyers to Capricorn and in that capacity have been involved in providing legal advice to Capricorn in relation to the Offer. Capricorn has agreed to pay Lavan Legal $ 9,000 (excluding GST) for services provided up until the date of this Prospectus. Lavan Legal may be paid further amounts in accordance with its time-based charges for services provided after the date of this Prospectus Expenses of the Offer The total expenses of the Offer payable by Capricorn will be approximately $15,000 (excluding GST). These expenses include accounting fees, legal fees, ASIC fees, the cost of advertising, printing and distributing this Prospectus and other miscellaneous expenses.

62 Capricorn Tax Status and Financial Year The Directors expect Capricorn will be taxed in Australia as a company and that Capricorn s operations in New Zealand will also be taxed in New Zealand. The financial year of Capricorn ends on 30 June annually. The Capricorn Group is consolidated for tax purposes Governing Law This Prospectus and the contracts that arise from the acceptance of Applications under this Prospectus are governed by the laws of Western Australia and each Applicant submits to the non-exclusive jurisdiction of the courts of Western Australia and the Commonwealth of Australia Consents Written consents to the issue of this Prospectus have been given and at the date of this Prospectus have not been withdrawn by the following parties: (a) (b) (c) Each of the Directors has given and has not withdrawn his consent to be named in this Prospectus in the form and context in which he is named; Lavan Legal has given and has not withdrawn their consent to be named in this Prospectus as Lawyers to Capricorn in the form and context in which they are named. They have not authorised or caused the issue of this Prospectus and take no responsibility for any part of the Prospectus other than references to their name; and Ernst & Young (Perth) has consented to be named in this Prospectus as Company Auditors and to the inclusion in this Prospectus of the Independent Auditor s Report as part of the Annual Report which is incorporated by reference under Section 712 of the Corporations Act. Ernst & Young (Perth) does not make any other statement in this Prospectus Acknowledgement By returning the Application contained herein, you acknowledge you have received and read this Prospectus Directors Statement and Signature This Prospectus is issued by Capricorn Society Ltd (ACN ). In accordance with section 720 of the Corporations Act, each Director has given and has not, at the date of this Prospectus, withdrawn his consent to the lodgement of this Prospectus with ASIC. Signed for the purposes of Section 351 of the Corporations Act on the date of this Prospectus by: Russell Becker Director of Capricorn Society Limited 18 February 2016

63 62 GLOSSARY Unless the context requires otherwise, the following definitions apply throughout this Prospectus: Account means the trade credit account provided by Capricorn to Authorised Purchasers and used to purchase goods and services from Preferred Suppliers and Capricorn its related companies. All Regions Class Shares means the class of ordinary Shares that may be issued to Eligible Suppliers or Authorised Purchasers connected to Eligible Suppliers. Annual Report means the Capricorn Annual Financial Report for the year ended 30 June 2015 and related Directors report and Auditor s report. Applicant means a person who submits an Application Form. Application means the submission by an Applicant of an Application Form. Application Form means the Application Form attached to or accompanying this Prospectus for the purchase of Shares. ASIC means the Australian Securities and Investments Commission. Australian Geographic Region Class means the class of Shares that may be issued to Members, Prospective Members or Qualified New Authorised Purchasers carrying on business in Australia and who otherwise meet the Membership Criteria for that class of Share. Authorised Purchaser means a person who has an Account. An Authorised Purchaser may also be a Member or a Qualified New Authorised Purchaser and may also be a Preferred Supplier. Authorised Purchaser Agreement means the agreement between Capricorn and an Authorised Purchaser that sets out the terms and conditions on which the Account is provided. All Members must have an Authorised Purchaser Agreement with Capricorn to use an Account and remain a Member. Capricorn means Capricorn Society Limited (ACN ). Capricorn Group means Capricorn and its wholly or partly owned subsidiaries (but for the avoidance of doubt excludes Capricorn Mutual). Capricorn Mutual means Capricorn Mutual Limited (ACN ). Closing Date means 4.30pm Western Standard Time (GMT/UTC + 8:00) on 10 January 2017 or any earlier date determined by Capricorn. Corporations Act means the Corporations Act 2001 (Cth), as amended from time to time. Direct Vote means a vote made by a Member in writing or electronically and in accordance with Capricorn s Constitution (and any regulation made thereunder). Directors mean the directors of Capricorn. Dividend Reinvestment Plan means the plan under which Members may elect to receive dividends by way of further Shares in Capricorn as more fully described in Section 2.8. Eligible Supplier means a Preferred Supplier who is considered by Capricorn to be a small to medium enterprise and according to Capricorn s absolute and unfettered discretion excluding any implied term of good faith, capable of purchasing meaningful volumes through an Account but who does not yet hold Shares.

64 63 Half Year Report means the Capricorn Financial Statements for the half year ended 31 December 2015 and related Directors report and Auditor s report. Issue Price means $1.00 per Share in the Australian Geographic Region Class, $1.00 per Share in the All Regions Class or NZ$1.00 per Share in the New Zealand Geographic Region Class. Member means a shareholder in Capricorn. Membership Criteria means the criteria for becoming a Member as set out in more detail in Section 1.2 under the heading What is the Membership Criteria for becoming a Member? New Zealand Geographic Region Class means the class of Shares that may be issued to Members, Prospective Members or Qualified New Authorised Purchasers carrying on business in New Zealand and who otherwise meet the Membership Criteria for that class of Share. NZ$ means New Zealand dollar. Offer means the offer to Capricorn Members, Prospective Members and Qualified New Authorised Purchasers made in this Prospectus to apply for Shares. Preferred Supplier means a supplier of goods and services with which Capricorn has entered into an agreement for the supply of goods and services to Authorised Purchasers on Account, typically connected with the automotive trade. Privacy Act means the Privacy Act 1988 (Cth) as amended or replaced from time to time. Prospective Members means a person who is capable of satisfying the Membership Criteria and is considering applying to become an Authorised Purchaser and Member of Capricorn. Prospectus means this prospectus dated 18 February 2016, and lodged with ASIC on that date, which replaces a prospectus dated 11 December 2015, relating to shares in Capricorn. Qualified New Authorised Purchaser means an Authorised Purchaser that is not a Preferred Supplier that has satisfied the Membership Criteria but to whom Capricorn has not yet issued Shares. Reward Points means the points allocated to each Authorised Purchaser for every $1 or NZ$1 that an Authorised Purchaser spends through their Account on eligible purchases from Preferred Suppliers and Capricorn related companies as described in Section 3.4(e), and including any bonus points that may be allocated. Shares means fully paid ordinary shares of Capricorn in the Australian Geographic Region Class, All Regions Class and New Zealand Geographic Region Class or one or more of the same as applicable. Special Resolution means a resolution: (a) of which notice as set out in section 249L(c) of the Corporations Act has been given; and (b) that has been passed by at least 75% of the votes cast by Members entitled to vote on the resolution.

65 64 CORPORATE DIRECTORY DIRECTORS Russell Becker Mark Cooper David Kemp Philip Saxton Julie Wadley Peter Stewart Bruce Rathie Mario Pirone COMPANY SECRETARY Bradley Gannon LAWYERS TO THE OFFER Lavan Legal 1 William Street PERTH, WA 6000 CAPRICORN S AUDITORS Ernst & Young (Perth) Ernst & Young Building 11 Mounts Bay Road PERTH, WA 6000 REGISTERED OFFICE 28 Troode Street WEST PERTH, WA 6005 Telephone: Facsimile: PROSPECTUS CONTACT DETAILS Freecall Australia: Freecall New Zealand: Web:

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67 THIS APPLICATION MUST BE ACCOMPANIED BY CAPRICORN S PROSPECTUS AND WARNING STATEMENT PO Box Victoria Street West Auckland 1142 Capricorn Society Limited Registered in NZ as an Overseas ASIC Company (Company Number: ) Registered under the Australian Corporations Act 2001 (Cth) (A.C.N.: ) FreeCall: FreeFax: APPLICATION TO PURCHASE SHARES (NEW ZEALAND) THIS APPLICATION IS AN IMPORTANT LEGAL DOCUMENT You must not complete this Application unless it was attached to or accompanying a complete paper or electronic version of the Prospectus and Warning Statement. Before making a decision to apply for Shares in Capricorn you should carefully read the whole of the Prospectus and Warning Statement provided for the purposes of the Financial Markets Conduct Act If this Application is accepted by Capricorn it will create a binding legal agreement between you and Capricorn. If you are unsure about any part of this Application Form, or the agreement it may result in, you should seek independent professional advice before signing. Please return your completed Application to your Capricorn Representative or to the address above. NZ Share Application Form (18 Feb. 2016)